I have been asked to share my property investing experiences with others and have organised a number of seminars to pass on some tips. On the 1st March I will be conducting an evening seminar in Singleton NSW. I am also visiting Muswellbrook and Weipa later in the month.

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If the pundits are to be believed, there are several trends this year that will provide savvy investors with opportunities to build a valuable portfolio and leverage existing debt to create new wealth building opportunities.

To expand on last month’s theme of ‘making the dream a reality’, I thought it would be a good idea this month to take a look at three property related trends that should provide you with some prompts for developing your own financial strategy in 2006.

1. FIRST-HOME BUYERS ARE BACK

According to the Australian Bureau of Statistics, 30 per cent more first-home buyers entered the market in November 2005 than a year earlier, borrowing a record $2.5 billion.

A survey released in January by the Housing Industry Association and the Commonwealth Bank showed a significant increase in housing affordability, with mortgage repayments now representing 36.7 per cent of the average Sydney home-owner's income. This compares to the 48 per cent that first-home buyers in Australia's most expensive capital had to set aside for mortgage repayments at the height of the affordability crisis in December 2003.

So if you’ve been waiting for an excuse to enter the market it would appear the time is right.

Tip: Save yourself hours of fruitless searching by using the Investors Choice ‘House Hunting’ checklist (found on the website) to work out what you really want and need from a home.

2. INVEST AND RENT

Another option increasingly finding favour is first home investing. A growing number of young people are buying investment properties rather than homes to live in as a first step towards cracking the ownership market.

Reversing the traditional model of buying a home first and an investment property second, a recent survey has unearthed 61,000 "first home investors"1. Most young investors in the study cited financial benefits for their decision. But for some it is as much a lifestyle decision as anything. Two-thirds said it would enable them to pick a property based on house price growth, and not on where they wanted to live.

“Purchasing an investment property in an area you can afford and then renting in an area you like, can be a very good option for those just starting out in the market… or even those who already own property. In fact it’s a strategy I use to great effect myself.

Tip: Work out what you expect from an investment: negative gearing benefits; positive cash-flow; or capital growth, then speak to a professional to help you settle on a financial solution that is right for you.

3. REVERSE MORTGAGES

This is a trend which sparked some interest last year and is set to continue in 2006. A ‘reverse mortgage’ is when a borrower (usually retired), borrows against the equity in their home to get access to spending money. Interest is capitalised over the term, and repayments are deferred until the borrower dies or the home is sold. Most lenders offer what they call a "no negative equity guarantee", which means that the amount to be repaid cannot exceed the value of the property.

Later in the year look out for a new type of equity release home loan. It predominantly targets baby boomers who own their own house but need funds for the kids wedding, an overseas trip, or an investment etc. It can be used for any purpose and has no monthly repayments. One of the conditions is that when you sell your home, repayment is linked to the increase in value of your property rather than interest rates. Something that can benefit many who are asset rich and cash poor. Something to keep on the radar, when released I will discuss the option in more detail.

Tip: For those Baby Boomers getting ready to retire, the reverse mortgage solution could provide you with access to ‘lifestyle’ funds currently tied up in the equity in your home.

While these are just three of the trends forecast to have an impact in 2006 , this should at least give you food for thought when you are considering what you might do with any extra income you find available to you.

1 Invest and rent: the new home solution, SMH, 25 January, 2006.

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