Wednesday, June 24 2015
Investing should be viewed like a business. At the end of the day it's all about the numbers. But I often meet with people who are wanting their investment to act as a solution for personal issues. When you start doing this you end up with an underperforming investment.
The one I often hear is people wanting to buy an investment property that someone they know can live in. Often it's parents wanting to buy something for the kids. Or it can be for a family member or friend.
There are a range of issues with this. The most significant is you are using a long term investment vehicle to solve a short term problem or issue. You are picking an area based on where the kids want to live or near where they work without actually researching to see whether the area is a good place to invest - what are the growth prospects like? what is the employment outlook? what are the supply side risks? what's happening with vacancies? what is rental growth like? what point of the price cycle is it at?
So what happens? A year or so down the track the kids change jobs, meet someone, move interstate or oversees, or just decide they want to live somewhere else. And you're left with a property that is meant to perform for you over the next 20 or 30 years. And if boughta based on emotion and personal reasons there's a good chance you've bought something that is an underperformer.
Investing and personal purposes should be keep strictly seperate. Let the kids sort it out for themselves the same way you did. They'll whinge about how expensive property is - just like you did. And whether you believe it or not they will still find a way to buy their own home the same way you did.
If you want to help your kids encourage them save and budget and give them the skills.
Saturday, June 20 2015
Some recent feedback from another client.
How satisfied were you with my services?
On a scale of 1 to 5 (1 being very poor, 5 being exceptional), how would you rank your overall experience with me?
Friday, June 19 2015
For most clients we are working with we are developing a long term plan to build income and wealth in retirement. Clients often ask "so when I hit retirement do I sell all my investment properties"?
I ask "Why?". If that property has doubled in value since you purchased it isn't there a good chance that it's going to continue to do that into the future. And if it is increasing in value then haven't the rents also gone up over time? So won't they keep doing that as well?
Once you sell then you are converting a growth asset to a non-growth asset - CASH. Cash may be safe but only in the short term. Cash does not grow in value. $100,000 in bank is still $100,000 in the bank in 10 years time. But the actual purchasing power of that $100K has gone backwards each year by the rate of inflation. On average 3% per annum.
So as soon as you sell, you come to a stand still, and as many retirees have found, when rates are low your yields are pretty ordinary.
I have the same thoughts about flipping properties. The costs to get in and out of a property are substantial.
The reality is in most cases to make money you will need a rising market. Why would someone pay above what you have put into a property in a flat or falling market?
And importantly you can make money in a rising market by just holding a property without all the effort.
But let's say after all that you do make a profit and have some cash in the bank. What then? What is going to fund your retirement?
Friday, June 19 2015
The Australian Taxation Office is to increase its scrutiny of the 1.8 million investment property owners this year.
The ATO is focused on people who are rorting the system and over claiming deductions. As part of this campaign, the ATO has recently stated it will write to investors with properties in popular holiday areas to remind them to claim only the deductions to which they are entitled.
Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. This is particularly important for holiday homes, where the ATO regularly finds evidence of home owners claiming deductions for their holiday property on the grounds that it is being rented out, when in reality the only people using it are the owners or their family and friends, often rent-free.
Another area of focus is where investors claim renovations or improvements as repairs and mainatenance. Putting in a new kithcen or a bathroom and claiming a deduction for the costs is a complete no no. At best you will only be able to claim a very small portion as depreciation over several years.
Thursday, June 18 2015
With the End of Financial Year quickly approaching, it’s a great time to think about income protection. If you became sick or injured would you be able to cover your ongoing mortgage repayments plus ongoing bills and other expenses?
Income protection can pay up to 85% of your pre-tax income up to $10,000 a month if you suffer sickness or injury that keeps you away from work. So you can keep paying your mortgage and other bills until you are back on your feet.
There is even an option to cover yu for involuntary unemployment of you are made redundant.
To arrange for a consultant to call you and sicus your options simply contact us and advise your mobile phone number
Tuesday, June 09 2015
Property researchers Terry Ryder and Michael Matusik have both noted growing vacancy rates in innner city Brisbane due to the increasig supply of new units.
Matusik notes “Apartments now dominate the rental market in Brisbane, with a 45% market share. Houses come in second with 38%, followed by townhouses with 11%.”
The average vacancy rate across inner Brisbane is 3.6%, compared to 3.1% in the middle-ring suburbs and 2.4% in the outer suburbs.
“Typically, a rental market is tight (rents rising) if the vacancy rate is under 2%,” the report says. “Between 2% and 3% represents a balanced market and over 3% suggests oversupply.
“An increasing number of locations in Brisbane, typically the inner-city postcodes, already have rental vacancy rates over 3%. And new rental supply, especially new apartments, is snowballing across Brisbane.
Monday, June 01 2015
1. Look at options that can help you pay less interest
Transactional offset accounts are a flexible option for potentially reducing the interest you pay on your loan. Every cent you deposit into your transactional offset account goes towards reducing the debt on your home, while still giving you access to your money the same way your transaction account does.
A transactional offset account that allows you to link multiple accounts to the same loan is an option that can give you greater flexibility in managing your transactions. For example, you can set up different accounts for things like paying bills or for your everyday expenses. Any money sitting across these accounts works to offset the total balance of your loan and your interest is calculated on the net balance. This means you may be able to reduce the amount of interest you pay.
Some home loans give you the flexibility of accessing extra repayments you have made on your loan through a feature called redraw.
Redraw can be a handy feature to make use of if you need to pay for unexpected expenses like repairs to your investment property or for renovations to your family home.
This means you can put extra money towards your loan to reduce your home loan balance, and therefore your interest payments, without losing access to that money if you need it down the track.
3. Pay your loan off fortnightly
Making more frequent repayments could help you chip away at your loan faster. There are 12 months in a calendar year, but 26 fortnights. If you make fortnightly repayments (paying half your monthly repayment each fortnight), over the course of a year you’ll make the equivalent of one extra month’s repayment, and your home loan will shrink quicker.
Not all banks automatically calculate their weekly and fortnightly repayments in this way, so make sure you speak to your lender about your repayment options.
Use our Home Loan Calculator to see what difference fortnightly repayments could make to your loan
4. Consolidate debt.
If you have accummulated some credit card debt or personal looking at consolidating that debt into a home loan could be worth considering. This will generally put the debt on a lower rate and have a structured reduction programme. If you maintain the payments you had before you consolidated you are liking to pay it off a lot faster which then frees up your cash to focus on paying down the home loan.
5. Become budget savvy
When it comes to keeping on top of your finances, nothing beats good budgetting. The basics are simple: know how much you are earning and spending; monitor your budget carefully; resist temptations that will rock your budget; and, if problems with repaying your home loan arise, such as job loss or an unexpected health concern, don’t hesitate in contacting your bank to talk through your options.
Contact us to look at how you can pay off your home loan sooner.
Monday, June 01 2015
While most people like the idea of buying their own home there's no rule that says that needs to be your first purchase. With the first home owners grant gone the benefits of making your first home owner occupied have diminished.
But times have changed, and now many first home buyers approach us to find out more about investing in property. There are pros and cons to consider in both situations.
Why buy an investment property first?
Buying an investment property comes with benefits. One of these is more flexibility in your living arrangements. You can continue to rent in that beach or inner city suburb that you love so much (but may not be able to afford to buy in), while still getting a foot on the property ladder. If property values rise, you won’t feel like you’re being left behind.
Depending on your situation, you could look for an investment property that offers the prospect of high capital growth, or a high rental return that will cover your monthly mortgage repayments.
You might also buy a property with renovation potential, and rent it out for a while before fixing it up and then demanding higher rent, or trying to make a profit on a sale.
Investment properties come with tax benefits. Most of the expenses you incur with an investment property are tax deductible. The big one being interest on the loan. This means your property could return you a substantial tax refund at tax time.
If you select the right type of property and structure things appropriately it can be possible to have a property that is completely self-funding. So you get a foot hold in the market without putting your hand in your pocket.
The importnat thing is to get some advice first and get an understanding of your options and the costs. Contact us to find our of property investment is appropriate for you.