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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. 2. Redraw 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. Tax matters 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. Monday, June 01 2015
John McGrath says there’s only one place in all of Australasia to be buying real estate right now. And that’s in south east Queensland. The founder and CEO of McGrath Estate Agents — who has 64 offices all over Australia — also thinks Sydney’s housing boom has almost run its course. “Right now, you can lock in the cheapest money you have ever been able to borrow. I am telling my clients to buy on the Gold Coast or in Brisbane,” he told News Corp Australia, during AREC, the second biggest real estate conference in the world, being held on the Gold Coast. “South east Queensland is my top pick of everywhere to buy in Australasia at the moment. “Sydney has experienced 40 per cent growth in the last few years and I hope its almost topped out or else we are all going to have issues. “For us I see the golden triangle out to Toowoomba, up to the Sunshine Coast and down to the Gold Coast. “Anywhere in Queensland will do well but I’d be hard pushed to find anywhere better to invest than the south east of Queensland in the next 3-5 years for capital growth. “People are more confident than ever, the economy is going well even though unemployment is ticking up and higher than we’d like to see but most people see light at the end of the tunnel.” Friday, May 29 2015
Reserve Bank deliberations suggest another interest rate cut may be coming in the months ahead. The last minutes indicate the board had already decided ahead of this month’s meeting that it had to cut rates – the only question was whether to do so in May or June. Board members also discussed several other factors that suggest another rate cut might be coming, including a sluggish local economy. Compared to earlier forecasts, growth and unemployment statistics are now likely to take longer to improve, according to the minutes. At the same time, inflation is also expected to be slightly lower than previously forecast, giving the board scope to cut rates. One argument against a third rate cut in 2015 would be the fear that this might foster imbalances in the housing market. However, while board members expressed concern about “very strong” price growth in Sydney and “strong” growth in Melbourne, they saw “much more muted” trends in other capital cities. They also noted the most recent data, which showed that there had been no increase in housing credit in recent months, either for investment or owner-occupancy purposes. Friday, May 29 2015
Every investor likes the idea of being able to regularly increase rent but the reality is rental grwoth like price growth does not move up in a straight line. There may be periods where you can incraese rent regularly, periods where you need to keep rent the same and even times where you need to take a hair cut. To be honest I find many investors often can't see the wood for the trees. They get very focused on the dollar value of the rent without looking at the bigger picture. There are a range of factors that should be considered at each rent review. The inflation rate and cost of living Vacancies can quickly offset rental increases The same rule applies in a tougher market. Sometimes you might have to drop the rent to meet the market. Again using our example is you dropped the rent by $20 a week then you would be given up $1,040 per annum but the drop in your cashflow will be stretched over the next 12 months. If instead you dug your heals in for $500 and the propery was vacant for 3 weeks you have already lost $1,500 in cash straight up. And if you do finally get a tenant at $500 it is going to take you 75 weeks to recover that loss. As I keep saying to clients just get a tenant in and get it rented, there will opportunity down the track to increase rents when the cycle turns. Research the competition What is the current vacancy rate for the area. If it is low you will probably have scope for an increase. If it is high you might just have to take what you can get. The time your property is avilable for rent may also be at the wrong time of year. Each market will generall have peaks and troughs throughout a year in terms of number of people looking to rent. The rent you are proposing needs to be in line with the competition. In some cases you may have added extras that tenants will value and can justify a slightly higher rent, for example an air-conditioning unit, a sunny aspect and great view, or an upgraded kitchen or bathroom. Its' important to take on board your managers advice. Remember the higher your rent the more thay earn as well so they are going to be looking for increases where possible but you are not going to get $50 more than everything else in the street jsut because that's what you want. Friday, May 29 2015
Moodys Analytics has found Queensland property is undervalued vy 4.3% based on rents, incomes and mortgage rates. It also believes the recent rate cut will contribute a 0.3% increase in values. Victoria, ACT and NSW are over-valued by 8%, 6.2% and 2.9% respectively.   |