Book Review > Property For Life

My first impression on seeing this book was – not another book on property! However I soon realized that “Property for Life” is put together in a unique way and deals with property at important stages of our life cycle. The advice is well researched, logical and practical. This book contains much useful information and good advice not only for the novice property investors but also as revision for experienced investors.

The authors deal with the subject in five basic areas which are matched with the needs of most people at their various stages of life and covers:

1. Your first house - getting into the market which usually coincides with marriage.
2. Your second house - the need for more space which usually relates to children.
3. Investing in high growth property – relating to surplus income and the need to reduce tax burden.
4. Assisting children to buy their first property.
5. Retirement and the need for down sizing and switch to income driven property.

The authors expand each of the above areas, setting out the challenges, the pitfalls and giving sound advice on the best way forward while highlighting the following phases:

1. Growth phase-building equity-purchase assets that produce strong growth.
2. Consolidation phase-consolidating equity-reduced non-deductible debt and allowing compound growth to work.
3. Income phase-producing passive income, using acquired equity to purchase assets that generate high levels of income.

Each of these phases lasts about 10 years and a useful technique employed in the book is to separate tips, examples and advice by bordered sections. This allows readers to separate their train of thought and avoid confusion and misunderstanding. For example:

• Tip - Every time your financial circumstances change your risk insurance should be reviewed.
• Example - Sell current home, buy next home, then buy investment property.
• Advice - On presenting your home for sale and on buying at auction.

My two favorite quotations from the book are that “Good quality, high capital growth property is rarely bought cheaply” and the other attributed to Albert Einstein which relates to time in the market and the power of compound growth “Compound interest is the most powerful force known to man.”
I also liked the way the book integrated a large number of important points into the various life cycle phases and discussed their relevance such as:-

• Planning and timing a loan application for optimum results.
• Stamp duty and selling costs.
• Tax and “the purpose test.”
• The advantages/disadvantages of purchasing at auction or private treaty.
• Understanding “on the market“ at auction.
• Whether to sell first or buy first when upgrading and under what conditions

The authors remind us of the importance of location and that capital cities are the safest places to invest for capital growth and income. They split cities into 5 demographic zones as follows:

• Outer suburbs- which can be volatile and not the best place to buy for investment purposes.
• Middle suburbs- which are not a prime prospect for investing in growth based assets
• Inner-middle suburbs- with good investment prospects
• Inner suburbs- which are sought after by investors, home buyers and tenants alike so demand generally outstrips supply.
• Central Business District (CBD) – in most cases not suitable for strong, solid long term growth.

The authors therefore argue that for the majority of people the best investments are to be found in the inner-middle and the inner suburbs of major cities. They also emphasize the importance of Land-to-Asset Ratio (LAR). They argue that the fastest growing asset is land, while buildings depreciate and the highest LAR is generally found in the inner-middle and the inner suburbs.

Further useful information is provided in that investors should allow about 10% on top of a purchase price when upgrading property to allow for stamp duty and legal costs of the new house and the selling cost of the existing house. They point out that these costs are an impediment to frequent buying and selling and the reason that property is a long term investment. Their advice is to review your property portfolio at least every 3-4 years, to stick to your plan, reinvest earnings and allow time for compound annual growth to do its work.

My lasting impression from the book is that most people do not do their homework thoroughly when purchasing property and that most purchase property only a few times in their lives. Further more many purchase out of frustration or are at the mercy of estate agents whose valuations can be misleading. It seems to me that most people could benefit from independent property advice. I appreciate that the authors have a vested interest in promoting independent advice but I do think that the services advertised on their website www.propertyplanning.com.au warrant consideration.

The book is certainly a worth while addition to most investors’ reference library because it is well thought out and researched.

Colin Dowzer is a member of the Victorian Council of the AIA.