It is estimated that the baby boomer generation in Australia owns around half of all residential investment property. As this age demographic moves into retirement (the BB’s started reaching retirement age in 2011) many will be seeking to sell their investment properties to fund their retirement. This was a subject I covered in a past blog post HERE.

Due to the current softness of the residential property market in many areas around the country, a significant number of BB residential property investors are wanting to sell their investment properties but are worried about the price they will get, the length of time it will take to sell the house, or even if they CAN sell the house.

Now unless you are an experienced property investment professional, and many of the baby boomers who invested in residential investment properties are not, you will be thinking that a sale of your investment property is the only option. However, this is not the case.

One strategy used by sophisticated property investors to transact their investment properties that you should consider is vendor financing. Vendor financing is where you as the seller also act as the bank for the purchaser. This style of buying is popular with those people who would struggle to get a bank loan because they are self-employed or have recently started a new job, they are a contractor, or perhaps they simply haven’t saved the required bank deposit of 10% or more. As you can see, these people are not necessarily bad credit risks, despite what the bank thinks of their situation!

Vendor financing works well for the seller if you don’t require the sale money immediately (vendor financing transactions typically take around 3-5 years to complete) or you need additional cash flow to fund your own loan repayments, property purchase or lifestyle. Furthermore, it locks in the purchase price at today’s value.

The way vendor financing works in practice is that the buyer enters into a standard residential property lease agreement with you as the owner for a period of time such as three years. The buyer rents the property from you for this time period and pays you a weekly amount that covers a component of loan interest and principal (just like a bank loan!), as well as the property costs such as rates, utilities and insurance. The actual weekly amount is whatever you can negotiate with the buyer, but is usually more than what they would be otherwise paying in rent on the property but similar or less than what the bank would be charging in principal and interest repayments.

A further contract called an “Option” is also executed with the buyer. The option can be structured in many ways, but it essentially gives the buyer the option to buy the house at an agreed price at an agreed time in the future. The objective for the buyer is to build up enough equity in the property through capital growth and principal repayments, so that by the end of the lease term they can re-finance the property through a proper bank loan and settle their purchase of the property from the seller.

Vendor financing works for the buyer because they get to buy a property now at today’s prices and are no longer paying rent to a landlord. This is a terrific way for the younger generations to get into the property market without waiting years to save up a 10% deposit.

It works for the seller because the method appeals to a wider range of potential buyers, they can execute a sale of their property in a soft market, their holding costs are covered, they retain ownership of the asset for the period of the agreement (important for tax depreciation and asset security) and they may also get additional cash flow for living expenses.

You can see an example of this kind of deal HERE.

Vendor financing is definitely worth considering if you are planning your retirement and want to off-load your investment property.

The biggest demographic shift of the 21st century is under way. In 1900, life expectancy at birth in the U.S. was 47 years. Now it’s closer to 80, and many of today’s children could live to 100. This gift of longevity represents a big and permanent shift in American life — one that may require a new set of rules.

Social visionary Marc Freedman, founder of the Civic Ventures think tank in San Francisco, recalls his own aha moment three years ago. As a 50-year-old father of two young boys, Freedman booked a hotel room for a family vacation using his AARP discount and requested two cribs. “There are a growing number of us who can be classified as neither-nors,” Freedman, now a father of three, writes in his new book, The Big Shift: Navigating the New Stage Beyond Midlife. “Neither young nor old. Neither ready to retire nor able to afford it.”

New opportunities

The first wave of baby-boomers turn 65 this year and the looming demands of 78 million seniors in the US threaten to swamp Social Security and Medicare. Some warn that the financial stress could cripple the economy and ignite a battle between people with walkers and those pushing baby strollers. But Freedman believes the unprecedented aging of America presents an opportunity to redefine the golden years for boomers and the generations that follow.

A yet-unnamed chapter of life is evolving for people between middle age and old age — much the way that adolescence was first recognized as a distinct developmental stage in the early 20th century. Many of today’s 65-year-olds are vibrant, active and engaged. Rather than retiring to a golf-course community and living off their savings for 20 years or more — an impossible scenario for many in the wake of the Great Recession — some are searching for a second act that combines meaningful work and a paycheck.

Freedman calls this new life phase the “encore years.” A few years ago, he launched a national conversation with his thought-provoking book Encore: Finding Work That Matters in the Second Half of Life. The companion Web site offers advice on switching directions in midlife and inspirational stories of individuals who carved a new path. Recent research sponsored by Civic Ventures suggests that there could be labor shortages by 2018 if boomers retire at traditional ages, particularly in education, health care, government and nonprofit organizations.

In The Big Shift, Freedman offers a recipe for transforming America’s coming midlife crisis into an opportunity for individuals and society. “Never before have so many people had so much experience and the time and capacity to do something significant with it,” he writes. He outlines out-of-the-box ideas, such as “gap years” for grown-ups; new kinds of internships and fellowships for Americans moving beyond middle age; remodeled higher education to help retrain people for these new roles; and new kinds of investment accounts to finance the cost of transitioning to new careers.

Sound like an impossible dream? No, it’s more like practical idealism, based on Freedman’s decade-plus-long mission to link experienced people who are eager to make a difference with nonprofit organizations in need of leadership. He spearheaded the creation of Experience Corps, a national service program for people over 55, and created the Purpose Prize, which annually provides five $100,000 prizes to social innovators in the second half of life.

If the golden-years dream was once freedom from work, the dream of this new wave is the freedom to work, says Freedman. The oldest boomers may be the lab rats in this longevity experiment, but every generation will benefit from new rules and roles for those who are beyond middle age but still too young to be old.

Article by Mary Beth Franklin, senior editor at Kiplinger’s Personal Finance.
Read more: http://www.kiplinger.com/magazine/archives/too-young-to-be-old.html#ixzz1PbDDE2Cd

Telstra has launched the search for Australia’s most “retired and wired” senior to debunk the stereotype that older Australians are more comfortable with a crossword puzzle than a smartphone.

The launch of Telstra’s “Retired & Wired” initiative is supported by a new Telstra report by social researcher Mark McCrindle that shows an increasing number of seniors are surfing the web, trading up to a smartphone, making video calls or among one of the 500,000 seniors ‘liking’ Facebook.

The research reveals seniors are keeping up with technology trends with one in three Australians aged 65 or older online daily and more than a third using online banking. Mobile technology is also popular, with 70 per cent of seniors owning a mobile phone and using it to send at least one text message per day.

Key findings

• Age of reason: Seniors currently comprise almost one in five Australians, with this number set to increase to one in four by the year 2050.
• Technology is the new black: The average Australian senior sends at least one text message every day.
• Staying connected: Seniors are increasingly likely to use more sophisticated mobile phone features such as taking and sending photos, recording video, using apps, accessing the internet and even downloading ringtones.
• How we connect: Older Australians are most likely to email friends (27%), read the news (20%) or use social media (12%).

Telstra Executive Director Consumer, Rebekah O’Flaherty, said the “Retired & Wired” search to find Australia’s most technology savvy senior was set to prove competitive.

“We are on the search for the quintessential logged on, linked in, tech savvy senior,” Ms O’Flaherty said.

“This generation has witnessed the greatest technology revolution. These technology adaptors have experienced around six decades of change when you consider the introduction of new technologies such as television, computers, mobiles and the internet.”

Ms O’Flaherty said finalists would be selected to compete in a series of challenges, from downloading music to blogging and using a Telstra T-Touch Tab®.

“The finalists will each win a Technology Prize Pack consisting of a Pre-Paid Telstra T-Touch Tab and a Pre-paid Telstra Wi-Fi device to help them compete in the finals. And, excitingly, the ultimate winner will walk away with $10,000 in cash and be given a national platform to share their technology tips and tricks,” she said.

Social researcher Mark McCrindle said: “We are living in a highly connected world and today’s seniors are actively embracing the latest technologies. It’s no longer considered just a young-person’s domain. The majority of retired Aussies report they’re excited by new technologies and use them to improve their quality of life,” McCrindle said. “And many demonstrate a greater level of skill than people half their age.”

To nominate yourself or someone you know in the “Retired & Wired” search visit:telstra.com.au/retired-wired or facebook.com/telstra.

Media Contact:
Craig Middleton
Mobile: 0400 931 772
Email: media@team.telstra.com

The days of your home being an ever-increasing source of capital growth may be over

If you are putting off moving into a retirement community because you are waiting for your house to go up in value, then you may be operating under a flawed assumption.

I came across a great article recently by Leith van Onselen on his blog “The Unconventional Economist”. The article essentially proposes that the baby boomer generation pushed up property prices from the 1990′s as they fell in love with investment properties. Leith argues that as these same boomers sell down their properties (to reduce debt, downsize, or top-up super and fund their retirement) it will cause a corresponding decrease in property values…

Investor appetite for housing began to grow in the 1990s as the Baby Boomer generation began to reach peak earnings age (45 to 55 years). They began buying up investment properties en masse as a way of both minimising their tax (via negative gearing) and ‘saving’ for retirement…But with the Baby Boomers soon to enter retirement, it follows that their appetite for investment properties will shrink, thereby removing one of the key demand-drivers of house price growth. Further, because higher investment yields can be earned by placing their funds in a bank term deposit than can be earned via rent, it is likely that many Baby Boomers will sell their property investments to fund their retirements. This process of property divestment is likely to accelerate once the Baby Boomers realise that there is little prospect of continued high capital appreciation.

Now as a property expert (and owner of residential investment properties), I can tell you that residential properties are not worth holding for their cashflow or yield – the main game is capital growth. In the event that capital growth becomes non-existent, you would be better off placing your money in a bank account than in a residential investment property.

What this portends is that supply (properties for sale) is going to outstrip demand (people wanting to buy properties), which as we all know, results in downward pressure on prices.

So if you are sitting in your 3-4 bedroom home in the suburbs waiting for the value of your property to come back to pre-2007 levels so you can sell up and buy that unit in a retirement community, then you may find you are sitting on an “asset” that continues reduce in value and at the same time, demand more and more cash from your pocket for repairs and maintenance.

Remember, if you sell into a flat market, you also buy into that same flat market. This can work out better financially for you anyway – on the “sell” side, your agents fees are less, as is your capital gains tax if it is an investment property you are selling. On the “buy” side, you pay less stamp duty on a cheaper buy price.

Don’t put it off any longer and make the move today (there’s a new year’s resolution for you!).

We are continually bombarded with media articles and research about the impact of our ageing population and how it is going to result in higher taxes, over-loaded hospitals and caravan-clogged road networks. So I think it is high time that we closed the door on our dooms-day soothsayers and thought about some of the more positive aspects of an older population (not all of them serious!)…

1. The hidden economics – Figures from the Welsh Assembly Government’s Strategy for Older People show the value and cost savings that many older people are making to the Welsh economy. If those older people who take on caring responsibilities were paid it would cost at least £1 billion a year. Similarly, the value of childcare provided by grandparents is estimated at £259 million a year.
2. Volunteers – Older people are the most likely group to offer their time to volunteer – the value of which has been estimated at £469 million a year. Similarly, Carers UK have argued that if carers across the UK (the majority of whom are older people) downed tools, it would cost the economy a staggering £87 billion annually.
3. Less graffiti – Most graffiti is done at night and older Australians generally prefer ABC’s re-runs of “The Bill” to spraying tags on local fences and walls.
4. Less traffic – Many seniors don’t drive, which has to result in less traffic.
5. Cheaper suburban homes – Many empty-nesters seek to sell and downsize out of their suburban family home where they have raised their families and move to smaller digs elsewhere (retirement communities, apartments, etc). With less demand coming through for larger properties prices have to come down.
6. More re-runs of “The Bill” on the ABC!

Can you add any more suggestions as to the positive aspects of an ageing population?

Great article this morning from Lisa Pryor at the Sydney Morning Herald – how Gen Y view their baby-boomer parents!

Read it HERE.

For sale. Any buyers?

I found a great article this morning by Karen Maley on the Business Spectator website, which talks about how the ageing population will affect house, stock and bond prices. Essentially, the group of asset buyers (GenX, Gen Y, etc) is shrinking while the group of asset sellers (baby boomers, retirees, etc) is growing – you don’t have to be a trained economist to know that increasing supply and falling demand equals lower prices.

I dont blog about financial stuff as a rule as there are plenty of people out there doing it and hey, my specialty is retirement housing, not finances! I will post interesting stuff when I find it though.

What do you think? Will the ageing population lead to lower asset prices or will immigration keep us in perpetual growth?

I came across this great article today on how to choose a financial advisor. It is written by Hank Coleman (yes, he’s American!) on his blog called “Own the Dollar”. Although it is aimed at a US audience, the tips contained in the article would be appropriate to anyone wanting some tips on how to choose a financial advisor.

In summary, the tips are:

1. Heart of a teacher - You have to know what your planner is doing with your money and why.  It is your money.  A financial planner should teach you, show you all of your options, and let you pick where you want to invest your money.
2. Licensed – In Australia, a financial advising practice needs to hold, or be part of a network that holds an Australian Financial Services Licence, as issued by ASIC.
3. Certifications – Check your financial advisor’s qualifications – are they trained to give financial advice?
4. Salesmen & compensation – Financial advisors are paid either through commissions on the products they sell (although this is slowly being phased out) or by you through hourly fees or service fees. Discuss up-front how the advisor is compensated and make sure you are comfortable with the method of payment. Financial advisors have to earn a living and you as the client need to understand that “you get what you pay for” – if you pay peanuts you will get a monkey! Personally, if there are three professionals representing me that I want to be well-fed and happy, it is my solicitor, accountant and financial advisor!
5. References & Interview - Your advisor should be passionate about personal finance and investing, passionate about teaching you and explaining personal finance to you, and above all, good with money! Ask trusted friends and relatives for references. Treat your selection of a financial advisor like a job interview.

You can read the full article here - How to choose a financial advisor

Click here to go to the website of the Australian Securities and Investment Commission (ASIC) website to download their Fact Sheet - Guide to choosing your financial advisor

Also check out the websites of the Financial Planners Association and the Certified Practising Accountants to find a financial advisor near you.

What about you? Got any tips you can share about choosing a financial advisor?

Our first-ever blog!

For our inaugural blog, I though I would take the opportunity to introduce you to my company, Find My Retirement Home (FMRH). I started FMRH in mid-2009, in the depths of the Global Financial Crisis, after being made redundant from my role as fund manager for a listed property management company. I had fully-intended to take advantage of the market turmoil and have a well-deserved year off, however it was not to be!

In between watching lots of TV and fishing, I was doing a little consulting on the side to keep my mind active. I had a client who was a retirement village operator and I was assisting them with some strategic re-positioning. While doing some market research for the client, I thought I would get in touch with a buyer’s agent that specialised in retirement homes to ask some questions around what retirees were looking for when considering the purchase of a retirement home. To my surprise, I couldn’t find one! I was stunned – here was a large and complex sector that appealed to a huge and strongly growing demographic, yet there was no-one providing our seniors with quality, independent advice about their purchase! I guess that was my eureka moment as I thought, “I could do that”! Never one to let a good idea go past, I swung into action and launched “Find My Retirement Home” a couple of months later.

Find My Retirement Home is an independent advisor and buyer’s agent that specialises in retirement living. Our mission is to help retirees get the best deal possible on their retirement home purchase and we do this in two ways – firstly, we work with retirees and/or their families to make an informed decision, to ensure they get a retirement home that is right for them. Secondly, we negotiate the deal or provide the client with information to negotiate the deal themselves to make sure they get a purchase arrangement that is right for them.

Our service ranges from a “Rolls-Royce” full turn-key solution, where we do all of the time-consuming research and analysis into any region in Australia and negotiate the best deal possible on the buyer’s behalf, to an information-only service called the Access Program, where we provide clients with all of the information and tools they need to do the work themselves.

Professional Development

We also provide professional development training to professional advisors such as accountants, solicitors and financial planners, to educate them about the retirement living sector and provide them with the training, tools and resources they need to give advice to their clients about purchasing a retirement home. The training consists of a 90 minute introductory course called “Making SENSE of Retirement Homes” and a further 90 minute course called the “Retirement Home Advice MASTERCLASS”.

These courses are designed to assist professional advisors to develop new advice and revenue streams around the provision of advice to clients needing assistance in purchasing a retirement home.

We also provide professional advisors with membership access to a special website that acts as an information and resource portal to provide them with the information, tools and resources they need to provide advice to their clients.

If you want to find out more about Find My Retirement Home or buying retirement homes in Australia, check out our:

Website

YouTube Channel

Facebook Page

Twitter

Otherwise feel free to give me a call anytime on 1300 425 442 to have a chat!