Creative Finance Newsletter JUNE 2010

$610 million is waiting for you

Every year thousands of Australians lose touch with bank accounts, maturing life insurance policies and company dividends.

Are you one of those people who has lost touch with their money?

If you are looking for spare change under couch cushions or desperately waiting for pay day it might be worth searching for unclaimed funds.

The Australian Securities and Investments Commission (ASIC) says its unclaimed money pool has risen to a record $610 million.

There have been 20,000 new additions to the ASIC database in the last year from lost bank accounts, life insurance policies that have matured and company dividends.

ASIC's senior executive leader for consumers and retail investors, Delia Rickard, says the pool also makes up money from building society and credit union accounts and from companies that have lost contact with shareholders.

Ms Rickard says many Australians do not realise they are able to do a search to find out if they have got missing money.

    "What we have is over 800,000 separate parcels of money which adds up to about $610 million that's waiting to be claimed."

    "Some people have just forgotten about certain bank accounts and when it's really big sums of money, like sometimes it's been over a million dollars, it's usually been as a result of a deceased estate."

The largest parcel of money in the pool is nearly $1 million from a person's bank account in Carlisle, Western Australia.

People living in NSW have lost the most money with almost $230 million yet to be claimed by more than 300,000 people.

Ms Rickard says there is no expiry limit on when the funds can be claimed back.

    "We get money in all the time - in several batches each year new money comes in - and because the money waits there until it's claimed, the money will always build up."

She says last year ASIC gave back $57 million in unclaimed funds to Australians.

    "It's always a concern, and we're always reminding people that if you move you really do need to let people know about your new address."

    "It only takes a few minutes to do a search and it's less time than standing in the queue to buy a scratchie or a lotto ticket and a much better chance of success."

For more information about unclaimed money go to www.fido.gov.au.

Property investing - a basic guide

Many of us thinking about building wealth may be considering investing in property.

2010 is shaping up to be a good year for potential property investors who might be considering taking the plunge.

There are plenty of advantages associated with investing in property including the potential for capital growth, rental income and tax benefits.

But there are risks that come along including finding quality tenants, earning the rental income you need and meeting the costs for maintenance and repairs. And of course capital growth is not guaranteed.

Have a plan

If you’re confident that property investing is right for you then you need to have a plan. Start by working out how much you can afford.

If the investment property is your first foray into property you’ll need to have saved enough money for a deposit as well as any additional costs such as stamp duty, legal fees and inspections.

If you want to avoid mortgage insurance you’ll need to have at least 20%. If you’re willing to pay mortgage insurance it may be possible to borrow up to 90% or more.

If you already own your own home and have built up equity you can use this to help pay for your investment. You can use this equity towards the 20% deposit and then get a separate loan for the remainder.

Monthly payments

You’ll also need to make sure you can afford the monthly repayments. Of course rental income is taken into account, but be realistic about the level of rent you’re likely to receive.

You’ll also need to consider there may be times when the property is without tenants.

Choose the location

Once you have worked out your budget it’s time to go on the hunt for a suitable location.

As a general rule look for areas that are close to amenities like public transport, schools and shops. Also focus on areas that are within commutable distance to commercial centres where lots of people work.

Choose the property

Once you’ve narrowed down the areas you’re interested in you can look for appropriate properties. Think about likely tenants. If it’s close to universities or an area that appeals to young professionals a unit might be a good option. If it’s an area full of young families a house with a nice backyard might be a better bet.

Whether you choose a house or unit the kitchen and bathroom are probably the two most important features. Built-in storage is also a big plus. Just make sure the property is neat, tidy and has the features that will appeal to your target market.

Make sure you do your due diligence before going ahead with the purchase. Do the relevant building and pest inspections. Also make sure you do your homework on the value of the property to ensure you don’t pay too much.

Managing the property

Once you go ahead and make the purchase you need to determine whether you want to be a ‘hands on’ landlord or pay a professional agent to do the work for you.

They’ll generally charge about 7% to 9% of gross rent to screen potential tenants, collect rent and organise repairs. They’ll also carry out regular inspection.

Take out insurance

Finally, make sure you have the appropriate insurance in place including building insurance. You could also consider landlord protection insurance.
DISCLAIMER: This newsletter is provided for general information only. Please do not rely on this newsletter as a substitute for specific legal or financial advice. Before making any decisions you should consider your specific objectives, financial situation and needs. You can unsubscribe by sending us a reply email with "Unsubscribe from e-Newsletter" in the subject line.