B U I L D I N G F A M I LY A S S E T S FINANCIAL CONSULTANTS • INVESTMENT PROPERTY • SUPERANNUATION FINANCE • PROPERTY MANAGEMENT PAGE ONE
McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
B U I L D I N G F A M I LY A S S E T S
FINANCIAL CONSULTANTS • INVESTMENT PROPERTY • SUPERANNUATION FINANCE • PROPERTY MANAGEMENT PAGE ONE
CONTENTS I McCarthy Group Celebrating a Decade of Growth I Our Mission and Vision I The CHALLENGE We Solve I THE McCARTHY WAY I The Power of Property I The immutable rules of property I Our Projects I Our Clients I Our People I Our Companies • Koala Blue Real Estate • McCarthy Group Financial I Your Future PAGE ONE
McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
McCARTHY GROUP - CELEBRATING A DECADE OF GROWTH Founded in 1999 as a mortgage finance company, McCarthy Group has grown into a strong and trusted group of companies that covers the full spectrum of investment property. We represent an investment concept whose time has come. At our core is the desire to help families understand and benefit from the unique Australian investment property concept as the route to achieving their financial goals. Our clients have described the results of working with McCarthy Group as literally ‘lifechanging’, and repeat investments and referrals now form a large part of our business. We are proud of the results our clients have achieved, and we are convinced of the soundness of the strategy they pursue. Their goals include paying off the home mortgage, tax reduction, private and tertiary education for their children, and achieving financial freedom and independence in their retirement years.
What they share is a strategy that uses the power of investment property to generate the financial returns needed to achieve their life goals. It’s a well-proven strategy that has stood the test of time, and that has performed strongly even when share portfolios and superannuation returns have collapsed. As we celebrate our first decade of growth, our founding clients will have doubled or tripled the value of their initial investments. They are greatly empowered and well on the way towards achieving their goals. They have taken responsibility for their money and their investments, and have experienced tremendous personal and financial growth as a result. To all our clients who have made our 10-year milestone possible, we say a sincere ‘Thank you’. To those who are yet to take the first step, we hope this celebratory brochure will give you the courage and confidence to follow in the footsteps of those who have gone before. Stephen McCarthy CEO
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All the teams at McCarthy Group were professional and courteous. I feel the McCarthy Group are like ‘FAMILY’; we all look after each other and I find that very comforting. Kim Strachan
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
OUR VISION AND MISSION Our mission is to release you from the burden of interest and tax and to provide you with better control of your finances. We believe that it is not the money you earn that will lead you down the road to financial independence, it’s the way you use it that makes the difference.
to everyday working Australians. We provide a safe end-to-end solution and take the hassle out of what can be a frustrating and time-consuming process. Many of our clients simply refer to us as a ‘one stop shop’.
We exist to help families discover the power of investment property as the route to achieving their future financial goals. Leverage and tax savings enable investments in property that compound and grow in value over time.
We owe a great deal to the late Frank Flowers, a builder and very successful property investor, who taught us these principles and left us with the responsibility to pass them on to as many people as we can. That is what drives us, and why we celebrate every new family that discovers the power of investment property as the route to achieving their life goals.
Our goal is to simplify the investment property process and make it understandable and accessible
McCarthy Group Building Family Assets
Our mission is to release you from the burden of interest and tax and to provide you with better control of your finances. Stephen McCarthy
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Thanks McCarthy Group for helping us through a big and somewhat scary decision to start our investment portfolio. We are so glad we went with a team who are friendly and know exactly what they are doing, and made us feel at ease through it all. Andrew and Ciara Beard
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
THE CHALLENGE WE SOLVE Over 90% of all Australians retire in financial circumstances that are very different from what they expected after a lifetime of hard work. Many others are simply unable to accumulate the money needed for milestones along the way, such as paying off the mortgage or investing in their children’s education. Once work stops so too does the income, and the majority of retirees live out their days on the age pension or equivalent. They resign themselves to living on Struggle Street, and regret not making provision for the future in the years when there was time to do something about it. With the abundance of financial advice available, with low unemployment and with compulsory superannuation, why can’t families accumulate the money they need?
In our experience, • Superannuation and/or the age pension will never be enough • The importance of investing time in future planning comes second to the more urgent needs of day-to-day living • People subscribe to faulty thinking and unhelpful myths about money and what they deserve • Many people ‘delegate’ their affairs to financial planners in exchange for high fees and poor results • Others simply leave things to look after themselves
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However, one thing is certain; by the time the problem is revealed, it’s often too late to do anything about it.
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
THE McCARTHY WAY Achieving future financial independence is a common goal amongst our clients, and McCarthy Group uses a logical and structured process to work out; • How much you’ll need as a lump sum to support your desired lifestyle in the years after work stops • How much you are likely to have based on your current situation and the years left to work • The gap between your future funding needs and projections based on your current situation. Based on the financial information gathered in our Lifestyle Planning workbook, one of our Chartered Accountants then develops a tailored Personal Investment Plan as a solution.
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The plan has clear financial goals. The cornerstone of the strategy is an affordable investment property that typically uses existing equity in the family home as a deposit. What makes this easier is that the balance is funded by a new mortgage. Repayments are funded primarily, if not completely, by rental income from tenants and tax concessions from the government. The power of the strategy unfolds over time, as rental income increases, and the capital value of the property appreciates. The solution could spell the difference between retirement hardship and the quality of life you have always hoped for. The only requirement is that you invest some time up-front identifying the extent of the future challenge, and then have the courage to act on it.
Many Australian families think investment property is simply ‘too hard’ and miss out on the remarkable longterm returns it offers. It is certainly a complex business, but not for our clients. We make it an absolute priority to keep the process simple and ensure that everything is made as easy as possible for you. We guide and assist you at every turn, from the initial property and loan applications, through the legal transfers, the building process (if applicable), all the way through to the management of your new investment. McCarthy Group is literally a one-stop solution, so you get to enjoy all the benefits of investment property while avoiding almost all of the hassle.
Overall everything was FANTASTIC! Everybody was very helpful and friendly. It sure made it easy for us to go through with this investment. Thanks again for everything you did for us to make one of our dreams come true. Colin and Jo Westwood
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
THE POWER OF PROPERTY It’s been said that 9 out of every 10 millionaires made their money in real estate. In addition to the family home, they invest in property and use the income it generates to buy more again. As time passes, each property becomes more and more valuable, increasing the owners’ wealth even while they sleep. Property ownership has always separated the ‘haves’ from the ‘have nots’. Property is scarce, finite, and much sought after. For generations people have fought wars over it. It is difficult to acquire given its high cost. Which is why so many people are unable to purchase property – they are simply locked out because they are unable to save the deposit, or think they cannot make the repayments. While no one can predict the future, history has shown that despite two World Wars, the Great Depression, wars in Vietnam, Korea, the Middle East and Iraq, the emerging markets crisis, Y2K, SARS, 9/11, and the Global Financial Crisis, property has stood the test of time. This is why investment in property is the key to a longterm strategy to grow your wealth. For example, if you wanted to accumulate a lump sum of $500,000 in 12 years time, could you save your way to this goal? (You would need to save over $40,000 from your salary, after tax, every year for 12 years. Could you do this?). Alternatively you could buy an investment property for $500,000, rent it out to cover a portion of the mortgage, and then sell it after 12 years for $1.2 million. Once you’ve repaid the mortgage and paid Capital Gains Tax, you’ve achieved your target of $500,000.* PAGE ELEVEN
*Assumes • Deposit of $100,000 • Mortgage of $400,000 • Mortgage costs covered by rental income and government tax concessions • Property growth of 8% pa • CGT of $180,000
To continue the example, if you had over 20 years remaining in the workforce, you could enjoy the growth of two property cycles, and end up with an asset valued at almost $2,000,000. And that’s just one property. It’s no wonder that millionaires make their fortunes this way. At work are two powerful principles: 1. The power of leverage
“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” Archimedes Leverage is a mechanical concept that has been successfully transferred to finance. Leverage means achieving more with less work.
BIG RESULT
Leverage can similarly be applied to accelerate our financial goals. At its core, financial leverage means using a small amount of our own money and a much larger amount of other people’s money and then investing it to increase our wealth and assets over time. Banks are prepared to loan the majority of the purchase price of a property because of the confidence they have in its long-term security. This enables you to get the leverage you need to accelerate the growth rate of your investment and increase your returns. In the case of investment property, a 10% to 20% deposit and a mortgage for the balance gives you ownership and effective control of a valuable growth asset.
100kg
SMALL EFFORT 20kg
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
THE POWER OF PROPERTY (Cont’d)
To illustrate its power; Investor (B) opens an investment savings account at age 19. For seven consecutive years he invests $2000 at an average growth rate of 10% and then makes no more payments.
Contribution
Year-End Value
19
-0-
-0-
2,000
2,200
20
-0-
-0-
2,000
4,620
21
-0-
-0-
2,000
7,282
22
-0-
-0-
2,000
10,210 13,431
23
-0-
-0-
2,000
24
-0-
-0-
2,000
16,974
25
-0-
-0-
2,000
20,872
26
2,000
2,200
-0-
22,959
27
2,000
4,620
-0-
25,255
28
2,000
7,282
-0-
27,780
29
2,000
10,210
-0-
30,558
30
2,000
13,431
-0-
33,614
31
2,000
16,974
-0-
36,976
32
2,000
20,872
-0-
40,673
33
2,000
25,159
-0-
44,741
34
2,000
29,875
-0-
49,215
35
2,000
35,062
-0-
54,136
36
2,000
40,769
-0-
59,550
37
2,000
47,045
-0-
65,505
38
2,000
53,950
-0-
72,055
39
2,000
61,545
-0-
79,261
40
2,000
69,899
-0-
87,187
41
2,000
79,089
-0-
95,905
42
2,000
89,198
-0-
105,496
43
2,000
100,318
-0-
116,045
44
2,000
112,550
-0-
127,650
45
2,000
126,005
-0-
140,415
46
2,000
140,805
-0-
154,456
47
2,000
157,086
-0-
169,902
48
2,000
174,995
-0-
186,892 205,581
194,694
-0-
2,000
216,364
-0-
226,140
500,000
51
2,000
240,200
-0-
248,754
450,000
52
2,000
266,420
-0-
273,629
400,000
53
2,000
295,262
-0-
300,992
54
2,000
326,988
-0-
331,091
350,000
55
2,000
361,887
-0-
364,200
56
2,000
400,276
-0-
400,620
57
2,000
442,503
-0-
440,682
250,000
58
2,000
488,953
-0-
484,750
200,000
59
2,000
540,049
-0-
533,225
60
2,000
596,254
-0-
586,548 645,203
150,000
64
2,000
883,185
-0-
858,765
65
2,000
973,704
-0-
944,641
0 Year
CAPITAL CITY HOUSE PRICE INCREASES
2003
780,695
2001
-0-
1999
800,896
1997
2,000
1995
63 1993
709,723
50,000 1991
-0-
1989
-0-
726,087
1987
658,079
2,000
1985
2,000
62
1983
61
100,000
Source: Australian Bureau of Statistics
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Year-End Value
2,000
1981
The results are astounding: despite only making 7 payments, by making them earlier Investor (B) ends up making MORE money than Investor (A), who started later but who made 40 contributions of $2000 each.
INVESTOR B
Contribution
49
300,000
House Value
Investor (A) makes no contribution until age 26 (which is the age Investor (B) is when he makes his last $2000 investment). Investor (A) then contributes $2000 a year every year until he is 65, also at an average growth rate of 10%.
INVESTOR A Age
50
ANNUAL MEDIAN HOUSE PRICES ($)
1979
The word ‘compound’ is used to describe the process whereby interest is earned on the outstanding capital amount as well as on the previous interest that has been earned. In other words, you earn interest on interest. It is the road to long term riches. To access its power you need to be prepared to make some sacrifice to invest, and then have enough time for the miracle of compounding to do its work.
In summary, leverage enables you to invest only 10% to 20% of the capital, yet keep 100% of the growth. Compounding shows the remarkable time value of money, and is the reason why investing in a growth asset is a decision not to be delayed.
1977
Einstein also referred to compound interest as the 8th Wonder of the World.
1975
Albert Einstein
In the case of investment property, the long term trends show property doubling in value every 7 to 10 years. This means that the growth is compounding as per the example above.
1973
“The most powerful force in the universe is compound interest.”
It seems unbelievable, so check the table alongside for the evidence. This is the ultimate proof of the saying, “Time is money.”
1971
2. Compound growth
Sydney Melbourne Brisbane
Less Total Invested:
(80.000)
(14,000)
Equals Net Earnings:
893,704
930,641
Money Grew:
11-fold
66-fold
Source: Market Logic, Fort Lauderdale.
THE IMMUTABLE RULES OF PROPERTY The secret to our success is a proven formula that follows key criteria for investment locations and ownership. We invest considerable resources in identifying the best possible areas, and we only recommend investment properties that are; • Situated in growth locations with a strong economic base • Characterised by growth in economic activity, leading to demand for skills, people and accommodation • Affordable to the mainstream rental market • Affordable to the owner • Attractive to tenants, including premium quality features • Newly constructed, with the added appeal of being modern and fresh • Situated within property developments that are generally limited in scale The second set of rules relates to achieving best practice in terms of; • Placing the property in the most effective ownership structure • Optimising the tax deductions available to the investor • Using the power of leverage to increase returns • Using a different bank for each new investment loan • Making use of professional property management
We make it our business to follow these rules so you can maximise your returns, minimise any risks, and enjoy the benefits of a strategy that is based on proven facts and a decade of outstanding results. The demand for rental accommodation seems certain to increase, which would serve to support rent and property price growth. This is due to; • An existing national backlog of 150,000 homes • A continued undersupply of a further 30,000 homes per annum • Continued strong growth in immigration • An increase in local population growth • An increase in the number of single-person households Generous tax incentives from the federal government make investment property additionally attractive and affordable to investors. There are other investment options – the share market being one. However, the impact of the global financial crisis has served to decimate the value of superannuation and share portfolios and many investors have been badly affected. In contrast Australian property has maintained its value over time. Perhaps the most convincing answer to the question ‘Why property?’ is one you can provide yourself: “If you could have bought more properties when you bought the family home, how many more would you have bought at that price?”
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
OUR PROJECTS To succeed in investment property you have to be in the right place at the right time. McCarthy Group has turned this requirement into a science. We have a 10-year history of consistently picking winners, enabling our clients to buy into areas well ahead of their discovery as emerging ‘hotspots’. Investing in areas that are primed for strong growth enables you to enjoy steady increases in capital values and rentals over time. You have to invest with your head and not your heart, and ensure that the location will enjoy strong economic activity and population growth. Our first projects were in Sydney. As prices rose we looked further afield and in early 2000 we entered Noosa. Our clients who invested in Noosa have seen phenomenal capital growth. This showed the potential for superior rental yields and property values in cities blessed with strong economic activity, affordable prices and a strong lifestyle appeal. We developed the tagline “Just Add Water” in recognition of the growth in demand and prices that accompanied the desire of Australian families to live within striking distance of the beach or rivers.
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Our track record of success includes taking advantage of growth prospects in, • Sydney 1999 • Noosa 2000 - 2003 • Gold Coast 2001 - 2003 • Perth 2002 - 2004 • Brisbane 2002 - 2004 • Darwin 2004 - 2006 • Townsville 2003 • Cairns 2006 • Mackay 2007 • Melbourne 2008 • Sydney 2009 While you may be able to achieve the same results for yourself, it takes many years of experience, detailed ongoing research and the resources to take advantage of growth areas where and when they present themselves. We do this all for you, ensuring you enjoy the rewards that come with investing in locations that are primed for future growth.
I have been so impressed that I have already referred McCarthy Group. I have been extremely satisfied with the entire process and professional yet friendly service. I can’t extol your virtues enough! Thank you! Jeff Turner
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
OUR CLIENTS Our clients come from typical hard-working Australian families, with careers as diverse as teachers, truck drivers, police officers, office workers and retail staff. The vast majority of our clients had never considered the future challenge that would confront them, nor the possibility of one day owning an investment property as the solution. It’s not surprising therefore that so many of our clients describe their investment decisions with us as “lifechanging” in terms of their impact. We exist to help our clients discover how investment property can enable them to achieve financial flexibility and independence. There is huge satisfaction in helping others to discover this secret for themselves, and we thrive on case studies and testimonials of client success. Our mantra is “Building Family Assets.” Once clients have bought an investment property, they can use its growth in value to fund a second property. They can then repeat the process, many times over. Some of our clients have made investments with their children in mind.
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For example, if they have 3 children, their goal is to acquire the same number of properties. We now have families where the children have become investors in their own right. One thing all our clients have had to overcome is the deep-seated fear that comes with making an investment decision. The fear of giving it a go, and of making a mistake. The fear of making a commitment and taking on financial responsibility. Many people simply can’t make this leap of faith, even though this is easier than they thought it would be. For those who are able to let go of the fear of the unknown, the sense of personal achievement and growth is enormous. They move from having a future challenge, to becoming a landlord as the solution, and to finally achieving their goal of financial freedom and independence. In the words of our clients, “It’s a life-changing experience.” We salute and respect them for their courage.
OUR PEOPLE McCarthy Group has a close-knit team of dedicated and loyal staff. We make it our mission to stay close to our clients and to understand their needs. Our Client Services team provides answers and constant support, while our financial and administration staff turn what can be a complex flow of paperwork into a well-organised and simple process of you approving it and our team doing the rest.
Many of our team have discovered the power of investment property for themselves. They literally ‘walk the talk’, and believe in the product and service they provide. They have empathy with our clients and understand their fears and their challenges, and take great delight as each new family comes on board.
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
OUR COMPANIES Koala Blue Real Estate Professional property management is a key element in the investment property mix. Koala Blue Real Estate manages our clients’ properties with a view to achieving maximum rental yields and a no-fuss experience. The team brings many years of experience to the management of client investments. With offices in Sydney, Melbourne, Townsville and Cairns, we have excellent exposure to some of the most dynamic property markets in the country. Our extensive knowledge of local market conditions combined with years of experience ensures our clients receive the best possible returns on their investments. We carefully select suitable tenants and ensure they fulfil their ongoing responsibilities and obligations as set out in the Residential Tenancy Agreement.
Our services include; • Careful tenant selection • Ensuring adherence to the Residential Tenancy Agreement • Regular property inspections • Property maintenance and repairs • Pest control measures • Monthly statement of rental income and authorised expenditure • Ongoing proactive communication Koala Blue’s mantra is “Doing it all for you’. We pride ourselves on providing a truly ‘hands-free’ solution where we manage every aspect of the property and tenancy and leave our landlords with the peace of mind and freedom to enjoy the fruits of their investment. Koala Blue. Doing it all for you. McCarthy Group Financial Finance and leverage are key drivers of investment property. McCarthy Group Financial is a company dedicated to meeting our clients’ finance-related needs. Outright ownership of the investment property is essential, and we have the experience to assist in establishing the best structures to maximise tax effectiveness and returns. Some clients register the properties in their own or their partner’s names, while others choose a trust with family members as the beneficiaries.
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We have excellent relationships with major lenders and we find the best mortgage terms available. Agreements with legal and accounting partners ensure that you have the best possible advice at every stage, and we provide access to personal, home and landlord’s insurance as the property nears completion. We do everything possible to simplify and streamline the paperwork for mortgage applications and property transfers. A major attraction of the investment property concept is its tax effectiveness. Our Chartered Accountants complete your tax returns for the first few years to ensure that the depreciation allowances, tax deductible expenses and income tax rebates are fully utilised. Some of our clients have achieved a position where they legally pay zero tax, using a strategy of negative gearing and multiple properties to do so. Recent change in legislation affecting superannuation has opened up new opportunities for self managed super funds (SMSF’s) to invest in and own property. This lets you harness the growth potential of property and put it to work for you while enjoying significant tax benefits and a high level of security. McCarthy Group Financial are specialists in obtaining finance for SMSF’s, and professional partners work closely with us to ensure the best possible advice and structures are set up prior to any investment.
The trend towards SMSF’s is gathering momentum, particularly after the poor results achieved through share-based investments and the loss of confidence in financial planners and their fee-based system that ensured their benefits flowed irrespective of performance.
McCarthy Group
We have the experience and partnerships needed to help you take control of your own self managed super fund and achieve long-term success.
Koala Blue
MGF
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McCARTHY GROUP I CELEBRATING A DECADE OF GROWTH
YOUR FUTURE If you could fast-forward 10 years, how would you feel as the owner of several investment properties? The investments would have increased substantially in value, the rents flow into your account every month, you enjoy meaningful tax benefits, and you are considering selling one of the properties to fund your child’s education. The balance will be put towards reducing your family home mortgage.
With a proven track record behind us, and with a world of opportunity in front, McCarthy Group is excited about the future. The results of our first decade of growth have been richly rewarding for our clients, and have proven our concept, and we are committed to helping as many people as possible discover the secret of investment property for themselves.
To borrow a phrase from Barack Obama, “Yes you can!” There is a new wave in personal investment where everyday Australians are resolved to take hands-on control of their finances and take responsibility for the way their lives will unfold. Yes you can provide for your future needs. Yes you can achieve financial freedom and independence. Yes you can become master of your own destiny.
Even the longest journey starts with the first step, which could simply be a no-cost obligation-free review of your present financial position and future outlook.
Call us today on (02) 9687 3601 or email us at info@mccarthygroup.com.au to make an appointment. It could be the most important call you’ll ever make.
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If everyone operated their business the way McCarthy Group operated, more people would invest. Shelley Cotter PAGE TWENTY PAGE TWO ONE
Building 2, Suite 2.01 35 Waterloo Road, Macquarie Park, NSW 2113 Sydney, Australia Phone: +61 2 9687 3601 / 1300 850 318 Fax: +61 2 9687 3610 Email: info@mccarthygroup.com.au PAGE ONE