Hi Dom,

Some suggestions;

1. Don’t sell them all in the same financial year.
2. If appropriate balance the gains with other losses elsewhere.
3. Sell in a low/no income year.

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi SIS,

The wife and I have spent most of our time in rental accommodation – work related so not by choice.

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi all,

Another way of considering the ‘four quarters’ from this mornings SMH.

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Act now to avoid sorrow tomorrow
June 5, 2004

When it comes to retirement planning, too many of us delay. Here’s a spur: the ‘life as a week’ analogy. Simon Hoyle reports.

It’s been said that “tomorrow” is one of the greatest labour-saving devices invented. Unfortunately, it’s also one of the most common wreckers of financial security. Procrastination is the arch enemy of the successful investor.

If someone asked you what you’d be doing when you turned 60, you might be able to answer in a general way. You might be expecting to retire, or preparing to retire. You should have paid off the mortgage; the kids should be well established in their careers and lives. But for too many of us it’s difficult to be too specific.

If someone asked you what you were doing next weekend, you could probably answer confidently. You might already have it sorted: a weekend in the Hunter Valley, perhaps, or watching the Swans, or going out to dinner, seeing a movie, taking the kids out . .

One thing you’d probably want to avoid would be working for some or all of your weekend.

Now imagine that your life could be compressed into a single week, where one day represented 10 years. You’d be 10 on Monday morning, and hit your 30s by Wednesday. By the end of the working week, you’d be well into your 50s.
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You’d reach 60, and possibly retirement, on Saturday.

Looked at this way, planning for your retirement would be just like planning for the weekend. And just like your weekend, you would probably prefer to avoid having to work through it. In fact, most of us would prefer to retire early – to knock off at Friday lunchtime.

Paul Gordon, national strategy manager for corporate relations at ipac Securities, uses a “your life as a week” analogy to help people focus on events that may seem a long way off. He says it’s a useful way of making people realise that while retirement may seem ages away, it’s not, and you could make effective plans for it today.

Gordon says he asks people to write the days of the week on a page, with each day representing a decade in their life, starting with Monday. This covers your late primary and secondary schooling years, Tuesday your early years in the workforce, and the weekend of Saturday and Sunday represents your retirement.

He says that when people realise how close they’re getting to their “weekend”, they begin to realise how little time they have to get their finances into gear if they want to retire by 60.

Gordon says the situation with retirement planning is “like your working life – if you don’t do as much as you would have liked in the first two or three days, then it makes for a mad dash if you want to meet a Friday afternoon deadline”. It could even mean you end up working on Saturday, he says.

Gordon says that just as the working week tends to get better as you get closer to Friday, there are also some financial pluses as you get older, including higher income and fewer financial commitments.

But as we all know, we’re generally living longer. That’s like having a long weekend, Gordon says. But it means that planning for the weekend is “even more important, as there is nothing worse than a wasted long weekend”.

Comparing your retirement planning with planning for a weekend helps defeat the investor’s greatest enemy: putting off until tomorrow what they could more productively do today.

Unfortunately, Gordon says, too many leave planning for the weekend until Friday afternoon.

“It becomes a train crash,” he says. “It’s like any other behaviour … I’ve always wanted to lose weight; I’ve always wanted to give up sugar; I’ve always wanted to stop smoking. You have to want to change your behaviour.”

The executive chairman of ipac, Arun Abey, says many people find the idea of retirement planning daunting. They think a plan has to be highly prescriptive and can be severely limiting, and that formulating and sticking to a plan can be difficult.

A good plan should be none of those things, Abey says. A good plan is more like a framework, which enables you to understand how a decision made today affects decisions you’ll face later.

But most importantly, a plan is something that you can put into effect right away. A first step could be as simple as setting up a regular direct debit from a bank account and sweeping a relatively small sum of money – perhaps a few hundred dollars a month – into a special-purpose account. It takes little effort to set it up – you can do it online in some cases – and once it’s set, you can forget about it.

“The reason most people fail or don’t prepare for their ‘weekend’ all that well isn’t because the vast majority of people don’t have the money or resources, it’s procrastination,” Abey says.

“If you have done nothing in the previous five or six days, it probably does become a bit daunting.”

If you know what you need to do on each day of the week to make sure you have a relaxing and enjoyable weekend, the task isn’t nearly as daunting as if you leave the planning until Friday afternoon.

Gordon says he’s found those who are least prepared for the weekend are (usually) male executives, who may be earning good money but aren’t necessarily saving much for retirement.

“We find the audience that needs the greatest education is the Wednesday/Thursday executives who are packaged up and are asked to work 12, 14 hours a day,” Gordon says.

“They have no time for their children, no time for their family, because they are so busy.

“What we try and do is shock them, a little bit, into thinking [about] what they are doing this for, and are they prepared for a train crash.”

The earlier you start planning, the less stressful it is, and the smaller the steps you need to take at each stage to get things properly organised.

“I’m surprised it’s taken us so long to work it out,” Abey says.

“By leaving it until Thursday or Friday, they have missed three or four days of the week – but the key message is that there’s still a lot that they can do, just by facing up to it and choosing to deal with it.

“What is surprising in the Thursday group is not the absence of any sort of structure or plan so much as how much money is frittered away.”

Planning is relevant even for people still at the start of the week, Gordon says, because learning good money habits can never start early enough.

Abey says there are two good reasons why sooner is better for retirement planning. One is that the sooner you start, the less you have to do in a hurry.

And the second is straightforward maths: the power of compound interest.

“Compound interest is powerful if you have the time to compound,” he says. “Otherwise it just becomes simple interest.”

Gordon says investors may not see immediate results, and they do need patience.

“Most people want instant results,” he says.

“Most people want instant success. But it’s a bit like losing weight: if you start to lose weight, you get motivated. If you don’t lose weight, you go off the plan.”

Hi Jars,

Of course the possibility of looking for cashflow positive properties is an option, however I would be concerned the holiday home will become a large millstone and detract your from your journey for an extended period of time.

Given the desire to periodically ‘put your feet up’ from time to time you may be better ‘paying yourself’ to go on a regular weekend away to recharge the batteries.

According to my calculations the ‘annual loss’ on this property is extremely high and as such you could earmark 10-20% of the otherwise loss money towards funding your regular little ‘breaks’ and at different localities.

But then I am not in your shoes so ………….

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi Jars,

It seems to me that you have drifted off course.

Your other properties seem to be ‘solid investments’ in your situation and have all been purchased with a clearly defined criteria and purpose in mind.

And then came the ‘holiday rental.’

I must admit I am anti-holiday rentals as a rule of thumb and as such I tend to put them almost in the same category as ‘doodads’ and trinkets. Compounding this is the fact that this property has consumed so much of your serviceability and equity for very little return. Any growth will need to be truly significant to offset the negative cashflow you have.

For mine – I think I would be cutting my ‘losses’ and selling the holdiay rental and using the borrowing capacity to get myself back on track. Sure you’ll take a buying and selling loss but it also means you will be back on track.

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi George,

The only thing that I can guarantee is that 2015 will be different – how?

Just dusting off the ‘crystal ball’ now and finding the ‘thinking hat’ and what do I see.

1. Continuing seachange drift.
2. Urban sprawl being halted/slowed and ‘infill’ becoming even more prominent.
3. Continued expansion of ‘work from home’ policies.
4. O/seas migration increasing to offset the aging workforce.
5. Australia economy moving even further away from manufacturing base.
6. Increased development of ‘creative’ financial packages by lenders.
7. More and more people using the equity in their own homes as base for other investments
8. ++++++

Ultimately I suspect property will continue to be a sound investment through the next 12 (or so) years – after all it was only 12/14 years ago people were saying that it was getting too expensive and repayments were a too large chunk out of the weekly pay packet.

Go even further back and there have always been times when property ‘wasn’t considered a good investment’ but as we know it has been a long term ‘success’

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi Miracle,

My recollection of Display Homes is the same as Yack’s they are usually on one of the main entry point into the new estate and as such will always suffer from ‘noise’ issues.

The few I have looked into seemed a little overpriced and as such I figured that I was going to be paying for the good returns too.

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Hi Shane,

Try this https://www.propertyinvesting.com/forum/topic/10827.html

Derek
derekjones1@bigpond.com

Property Investment Support Available. Ongoing and never stopping. PM welcome.