BY MICHAEL YARDNEY

You’re either applying these points to the other party or they’re using them on you. So let’s look at them.

1. Options

When you’re buying a property, it’s important to convince the seller that you have more options than they do, because power in negotiation goes to the person with the most options.

Look at it this way – if a seller has two buyers lined up waiting to offer him $500,000 for his property, he has options. You probably have little chance of getting him to accept your offer of $480,000.

However it’s important to realise that in negotiation you often deal with perception rather than reality.

Agents might tell you they have other buyers interested or better offers than yours, but they’re simply applying this same pressure tactic on you.

To gain power in negotiation you must convince the vendor through his agent that you have more options than they do. Currently this isn’t too difficult because in most markets there’s an abundance of properties for sale.

Let the agent know that there are also other properties you’re interested in. You could say you like this property but there are two others you have in mind in a better location and at a lower price.

Remember the person with the most options has the upper hand in the negotiation.

2. Time

If a vendor is highly motivated and under time pressure, you could find yourself a terrific buy.

While it might be hard to work out what type of pressure the vendor is under, the selling agent will sometimes tell you that they’ve already purchased elsewhere and must settle at a particular time.

Other time-motivated sellers include people going through a divorce or moving interstate.

To help find out how motivated the vendor is, you could ask the selling agent why they’re selling, where they’re moving to and whether they’d consider a lower offer for a quick settlement?

Other sensible questions to ask are:

• How long has the property been on sale?
• Have they received any offers on the property?
• How did the vendor come to his selling price?

I like to use time pressure when making a written offer to purchase. I’ve found it helps if I put a deadline on my offer, such as 6pm tomorrow or the next day.

I always give an explanation to the agent, that I’m considering purchasing a particular property that’s going to auction this weekend and if the vendor doesn’t accept my offer by Thursday, I’m keen to buy the other place.

3. Knowledge

In negotiations the side with the most knowledge will do better. Fact is, if you’ve done the proper research you should know more about the property market in which you’re buying than the seller.

Apart from researching the local property market, it’s also good to find out what you can about the vendor. The problem is that most of what you know comes from the agent.

But the reason you should find out as much as you can about the seller and their property is that it’ll give you a better insight into the real motivation for selling. This could lead to a creative win-win solution that will let you buy the property below market price.

In summary, remember these three critical negotiating pressure points when negotiating your next property purchase. Make sure you take advantage of them and that the selling agent doesn’t apply them to you.

Michael Yardney is a director of Metropole Property Strategists, who create wealth for their clients through independent, unbiased property advice and advocacy. Subscribe to his Property Update blog.

BY MICHAEL YARDNEY

Victoria added 88,966 people to close the financial year with 5.624 million people, just under 25 per cent of all Australians.

It was the 11^th year in a row that the ABS projects Melbourne led the nation’s growth. In that time, the city’s population has grown by more than 750,000, or almost a quarter. Of course growth at this pace leads to strains on infrastructure, especially in the outer suburbs where much of the growth occurred.

Australia added almost 360,000 people in that, and the Bureau estimates the country’s population hit 23 million recently.

Perth outgrew Sydney to be Australia’s second-biggest growth centre, with its population swelling by 65,434 or 3.6 per cent. That’s more than twice the national growth rate and Perth’s population is now almost 1.9 million.

Victoria’s Planning Minister Matthew Guy was reported as saying the city’s population was growing by 1500 a week, or equal to the combined growth of Brisbane, Adelaide, Gold Coast, Newcastle and Canberra. He said many of the problems in urban areas arose because growth was not managed well in the last decade.

The city’s population centre remained in Glen Iris, but most of its growth came north and west of the Yarra, a dramatic change from 20th-century patterns, which saw it spread in a lopsided way to the southeast.

Clearly Melbourne’s strong population growth has been one of the factor’s underpinning the strength of the Melbourne property market. The overall housing market started recovering around 12 months ago.

However the market is quite fragmented. While there’s a shortage of established homes and apartments relative to buyers in Melbourne’s middle ring suburbs, there’s a substantial oversupply of apartments in Melbourne’s CBD and some inner ring suburbs.

There are also many new houses sitting vacant in Melbourne’s outer suburbs while new homebuyers are standing on the sidelines with their hands in their pockets.

Michael Yardney is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He is best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.

BY SHANNON MOLLOY

Similarly, like any good generation Y tech geek, I did so in tandem with a scanning of social media platforms like Twitter and Facebook. What struck me immediately wasn’t the seemingly equal split of public opinion on the slashing of the Baby Bonus, but the degree to which every Tom, Dick and Harry became an economic expert.

If you were watching Wayne Swan hand down his Budget last night, which opinion polls strongly indicate will almost certainly be his last, you probably heard an air of disappointment tinged with sadness in his voice. I certainly did.

I don’t think he’s disappointed about the lack of a surplus this year, although I’m sure it frustrates him. Revenue is down significantly on what was forecast. I dare say he’s not too sad about the deficit, although it’s politically inconvenient. Instead, I suspect he might’ve felt glum knowing that his carefully crafted ream of paper that outlines the balance sheet and current and future spending would be torn to pieces by the Australian people.

Monash University’s Professor Greg Bamber today described the Budget as “legacy building”, characterised by the once-in-a-generation social policy Disability Care. In addition, you’ve got major education funding reform and a significant chunk of new change for infrastructure projects across the country.

And yet, those listening on the fringes and not truly engaged in the finer details probably didn’t blink at that. They’d be more concerned about debt, the disappearance of the Baby Bonus, a higher Medicare Levy and a modest grab for cash from those with flush superannuation funds.

That’s fair enough. We’ve all got our own priorities. It just seems those priorities are far more important to us, individually, than a long-term platform for the collective.

There was money in last night’s Budget for employment services, workplace relations, cancer treatment, debt assistance for farms, roads and rail, technology, the environment and more.

However, given the political importance of a balanced budget and a surplus, there were many areas that were neglected. Programs were cut, spending was downsized, housing got little attention, defence spending was lowered, tertiary scholarships were turned into loan programs and tax levies were lifted.

I’m not interested in passionately defending the government’s credibility on economic management – many have already done that and many more have attacked it. I’m also torn on that issue. On one hand, we were led through the GFC with relative ease and wound up the envy of the world. On the other, there was waste and shameful incompetence with programs like the insulation rollout and Building the Education Revolution.

I just couldn’t help feel a bit sorry for Wayne Swan last night. He’s outlining how the government proposes to pay for some of the biggest reform packages in the modern era. He’s pointing to his plan, believable or not, to get the balance sheet back in the black. He’s explaining with vain how the country’s fiscal position isn’t entirely his fault – a high Australian dollar, revised economic growth projections and shrinking revenue.

In essence, he’s justifying why in his view it’s worth paying a little more and foregoing a surplus in order to get a whole lot.

Unfortunately for him, few care and even fewer are listening. The government could’ve revealed a ‘puppies, rainbows and free money for all’ program last night and there would’ve been a chunk of us left unhappy. That’s why Wayne Swan has arguably the crappiest job in the country.

Shannon Molloy is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au

BY MICHAEL YARDNEY

In my opinion that’d only give them a very basic lifestyle since they’d in general live off the $40,000 in interest they receive on this, or on dividends from the shares in the fund.

Apparently a single person would need about $800,000, once again just to live modestly.

Single or not, I think you’ll need much, much more than this to fund a comfortable retirement.

Either way, this means millions of Australians will struggle in retirement because only 10 per cent have more than $100,000 in their super accounts. Last year a report by the Association of Superannuation Funds of Australia stated: “On the basis of the current average superannuation balance and average income of those aged 35 to 44 and the assumption of only compulsory superannuation contributions being made, the average retirement superannuation payout at age 60 for a male currently aged 35 to 44 would be $183,000, while for a female it would only be $93,000.”

That’s scary stuff. Most gen Xers will fall far short of being able to retire on their superannuation. It’s little wonder more and more people are looking at taking control of their financial future and setting up self-managed superannuation funds (SMSF).

With 5.3 million baby boomers transitioning into retirement over the next 15 years or so, I see properties bought in a SMSF as a major driver of property values over the next decade.

So, the big question is: how much money do you really need for your retirement? Well, lifestyle is a very personal thing – luxury living for one person is a modest existence for someone else.

While you’re in your working years, choosing a lifestyle is simple. Most of us live the life we can afford. If we want a fancier lifestyle, we need to earn more, win the lottery, marry someone rich or inherit money from a rich relative. However if you want a comfortable life in retirement, you better start working on your financial independence now. Super alone is unlikely to get you there, but growing a substantial property portfolio just may.

Here are four timeless rules for achieving financial freedom. Please don’t dismiss them because they sound so simple:

1. Spend less than you earn. This maxim may seem obvious, but many people have difficulty following it. If you’re spending more than you earn, you’ll never become financially independent. You’ll be paying money to others for the rest of your life. The earlier you start living by this rule, the better. It’s never too late to start.

2. Invest the difference wisely. It may surprise you, but the average Australian earning between $50,000 and $60,000 a year for 40 years will earn somewhere between $2 and $3 million during their working life. Most of them will retire poor. Clearly the level of your income has no bearing on the level of wealth you achieve. What’s critical is the amount you save and invest wisely.

3. Reinvest your investment income. As you’re beginning to understand, you’ll never become financially independent on your earnings alone. You need to keep reinvesting. In fact, by the time you become financially free almost all your assets will have come from compounding capital growth, not from your income, your savings or your rent.

4. Keep doing steps one and two. Do them until your asset base reaches a critical mass so that you have the cash machine that gives you the income you desire. If you’ve been following my blogs you’d know I advocate growing a multi-million dollar property portfolio as your cash machine. I’ve written a best selling book on that topic (www.TheBookOnPropertyInvestment.com).

So how many properties do you need to retire? Do you know?  Well, it’s a trick question. It’s not really how many properties you own that’s important. I’d rather own one Westfield Shopping Centre than 35 small regional properties.

In other words, what’s really important is the size of the asset base you build – the size of your cash machine. And this probably needs to be a lot bigger than you think.

An SMSF as a vehicle to buy properties and increase an asset base is the new hot topic. What are the main advantages and disadvantages of taking this tact when it comes to building your own retirement nest egg?

The good:

• You have control over your super rather than entrusting your future financial wellbeing to a complete stranger, who’ll take your hard-earned cash and invest it in shares and managed funds that may or may not perform.
• You can make the money in your SMSF work harder by using it as a deposit and borrowing to investment properties that grow in value.
• In the past, those who bought a property in their fund until they retired were exempt from paying either capital gains tax if they sold the investment or income tax on any rent should they decide to hang on to it. Before they retired, any capital gains or rental income generated by the SMSF was taxed at a rate of 15 per cent for income and 10 per cent for capital gains. Recent changes to the tax law mean that in the future these concessional tax rates will change, but owning property in super may still be tax effective for you.
• You’ll have a diversified super portfolio that’s not reliant on just one investment vehicle, meaning you’ll have better financial security for the future.

The bad

• You could face thousands of dollars in establishment costs and sometimes there’ll be higher fees involved in borrowing to buy property through your SMSF.
• There’s no denying that managing your own super fund can be a minefield of complicated rules and regulations. Get something wrong and you could end up paying hefty penalties. Of course, you can pay a professional to manage it on your behalf and this is something I’d strongly advise anyone with a SMSF to do – whether they’re buying real estate or not!
• You have to have the cash to do it. This isn’t a strategy for someone with a small amount of cash in his or her super fund. Basically, unless you over $150,000 of available funds in your SMSF and are still contributing to it, the banks mightn’t be willing to lend money to buy property.

If you’re at all concerned about financial independence in retirement, put some plans in place, review your finances, do something today and don’t leave it until it’s too late.

Of course before you go down the route of setting up your own SMSF, it’s critical to seek independent advice from a properly qualified financial planner to ensure that it’s appropriate for your circumstances. Critically, it’s worth being sure you set up things correctly and don’t fall foul of the tax man.

Michael Yardney is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. Subscribe to his Property Update blog.