Knowing your limits and the market will help to expand your property portfolio.
Why do some people struggle to buy one investment property and yet others manage to own five or six? The answer isn’t simply that they have more money.
Investors who are creative in their approach to financing and who thoroughly research the important real estate indicators routinely achieve their goals faster and with less hassle.
There are several well-known ways to increase a property portfolio. You can take out an interest-only loan, buy with partners as ”tenants in common” or tap into your home equity.
Owning an investment property is not out of reach, it simply requires an astute approach. Photo: AFR
All of which help free up cash flow, enabling you to make more substantial contributions to a principal place of residence or to access cash flow for other investments. Coupled with buying investment properties in the right place at the right time, these tactics have reaped financial rewards for many people.
But savvy investors take their strategies to the next level. Let’s look at some of the less-traditional approaches to more profitable property investing.
Varying your income tax
If you’re negatively geared, a good way to improve immediate cash flow is to ask your accountant to submit an income tax variation form to your payroll office.
This reduces the tax rate charged on your wages by estimating your total end-of-financial-year tax position in advance. Rather than receiving a lump sum tax refund, you receive money evenly throughout the year.
Line of credit with a global limit
This is a line of credit home loan with a ”global” or ”umbrella” limit and several sub-accounts. It gives you maximum access to your equity to optimise your investment opportunities. The loan can be operated with multiple accounts under one global limit.
Mortgage Choice spokeswoman Belinda Williamson says line of credit accounts can be attached to a credit card. ”If you earn a decent income, using a credit card for expenses should mean that most of your income stays in the loan until the credit card payment is due, which helps to reduce the loan balance.”
Targeting distressed vendors
Successful investors don’t appraise the properties on the market in an area, they try to work out why they are for sale. Paul Osborne, of the buyer’s advocate firm Secret Agent, says it’s a smart move to understand household indebtedness in specific areas to snare a bargain.
He says many households are managing to service only the interest repayments, not the principal amount, of their home loans. As a consequence, the best buying opportunities tend to be in suburbs that have high proportions of household debt.
A secondary dwelling as an investment
Building second dwellings, such as granny flats, on the land held by either an owner-occupied or an investment property has become a growing trend. These dwellings can generate extra rental income and increase the property’s future value.
They also provide depreciation benefits and must be council-approved. Lending criteria for secondary dwellings varies from lender to lender and it’s smart to monitor how such additions in an area have shifted property values.
Choose a loan tailored to your needs
Depending on your finances, lifestyle and investment portfolio, there are a range of property loans to consider. Ms Williamson recommends checking the health of your home loan at least once a year.
”You should make sure that your loans not only meet your current needs but also take your future needs into consideration,” she says. ”Make sure that you are managing your loan, rather than letting it manage you.” Always be aware that new products are entering the competitive housing finance market constantly.
https://madeleinehicks.com.au/wp-content/uploads/2012/03/Make-the-most-of-your-investment-dollars.jpg800800adminhttps://madeleinehicks.com.au/wp-content/uploads/2019/08/Madeleine-Hicks-Real-Estate-Brisbane-300x64.pngadmin2012-03-26 09:12:402018-03-01 14:13:02Make the most of your investment dollars
With the recent rise in interest rates many borrowers are looking at changing lenders. The importance of keeping your credit rating squeaky clean cannot be under estimated.
“Most of us stumble from time to time, perhaps being late with a telephone account or minor bill. The problem for many consumers is that as banks are taking a harder line on borrowers and applicants, these minor defaults can adversely affect ones loan application,” said Madeleine Hicks of Madeleine Hicks Real Estate Everton Park.
“Keeping a clear credit rating gives you options. Banks are more likely to approve your loan application to start with and those applicants with equity and a good history can negotiate better deals with their lender,” explains Madeleine.
Whilst many are outraged by the greed of the big four banks by raising rates outside of the Reserve Bank of Australia’s official rates, changing banks may not be your best solution.
“Changing lenders is costly. Make sure that you will benefit overall. Often it is best to secure another loan then go back to your existing lender and negotiate an even better deal,” concluded Madeleine Hicks.
Madeleine Hicks can be contacted on 0413 733 617 or 3355 6845.
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Making your home energy and water efficient not only assists the environment but can save you money over the long-term.
Here are five water saving tips:
Install water efficient shower heads
Install water efficient tapware
Install sprinkler watering systems with focus on efficiency
Purchase water efficient washing machine
Purchase water efficient dishwasher
https://madeleinehicks.com.au/wp-content/uploads/2012/02/Five-Water-Saving-Tips-To-Save-You-Money.jpg533800adminhttps://madeleinehicks.com.au/wp-content/uploads/2019/08/Madeleine-Hicks-Real-Estate-Brisbane-300x64.pngadmin2012-02-13 14:19:532018-03-01 14:31:07Five Water Saving Tips To Save You Money
It is funny how humans are so different from one another yet so similar at the same time.
Take purchasing your first investment property for example. Each of us will have different criteria by which we will make decisions, a different financial structure and a preference of locations.
However, each will experience the emotions of fear and uncertainty.
Leading agent Madeleine Hicks of Madeleine Hicks Real Estate Everton Park believes that many first time investors can over research or over think their options.
“Some investors do so much research that they in fact scare themselves out of property investment,” said Madeleine.
“Often we can see all the reasons why property investment makes sense yet one article as to why shares out perform property or a bad tenancy story can shelve the property investment for months, sometimes years and on occasions, forever,” explained Madeleine.
“I always recommend that a buyer undertakes research and ensure due diligence when making a decision. The fact is that to the inexperienced too much research can confuse and lead to procrastination,” concluded Madeleine.
Madeleine’s tip for property investment include:
Buy your first investment property local – you know the local market.
Understand negative gearing
Understand taxation benefits
Buy something that appeals to tenants
Buy peace of mind
Brand new property will generally make a great first investment.
Make sure you are buying reasonable value property
Madeleine Hicks can be contacted on 0413 733 617 or 3355 6845 for all your property investment needs.
https://madeleinehicks.com.au/wp-content/uploads/2012/02/Dont-Let-Too-Much-Information-Kill-Your-Property-Dreams.jpg500686adminhttps://madeleinehicks.com.au/wp-content/uploads/2019/08/Madeleine-Hicks-Real-Estate-Brisbane-300x64.pngadmin2012-02-03 08:45:462018-03-01 14:31:17Don’t Let Too Much Information Kill Your Property Dreams
When renovating for profit it is important to get the floor plan right.
Consumer’s tastes and expectations change over time and what was a modern floor plan in the 60’s isn’t any longer.
Here are some tips for getting the floor plan right.
Minimum TWO BEDROOMS – by adding an extra bedroom you will add value.
ADD AN ENSUITE – gone are the days where families survive around the one bathroom. It still happens, however it isn’t the preferred option. Where possible add an ensuite bathroom or shower.
LAUNDRY indoors. Most buyers prefer an indoor laundry as opposed to the old “wash shed” out back.
LARGE OPEN KITCHENS – Buyers like large open kitchens with plenty of bench space.
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Here’s a challenge. How fast could you pay your mortgage off? The sad realisation hit me earlier in the year that I’m not likely to get rich anytime soon. I know – why did I even think that would happen?
The only path to financial freedom is going to be to make sacrifices – some pretty big ones – and slash the mortgage as soon as possible. Then compound interest and investing will be able to actually earn us money. The sooner the mortgage is gone, or at least significantly reduced (given the size of mortgages these days!), the more money we will have to enjoy life.
Yes, it can be a little boring trying to pay a slab off the mortgage. But once you owe a lot less you’ll be able to use that spare money to do things that you want, instead of feeding it to the bank all the time. If you’re in deposit saving mode, the tips below will also be helpful.
#1 Stop Spending. Sounds simple, but do you find yourself wondering where all your money went? Does it leak out of your wallet like a bucket with a hole in the bottom? We’ve tried budgeting before but it just seemed too complicated. After a couple of weeks we’d get bored and the whole thing would go out the window. So now we’ve just decided to stop spending on pretty much everything – except the essentials, and a couple of luxuries we just can’t live without.
#2 No new clothes. In fact no new anything. Terrifying for some, I know. But we’ve decided to put a ban on buying any new clothes for two years, and most other goods too. I already have enough threads to dress the people of a smallish nation so it really shouldn’t be too much of a challenge. It’s just the boredom factor, really. Second-hand op-shop bargains are allowed and it has become surprising to see what you can actually find, if you have the time to look. And given we’re not heading out to pubs and cafes anymore, we have to do something with our time.
We’ve got little kids so obviously they can’t wear the same clothes for two years, unless we put bricks on their heads. But we’ve made it known that we welcome all hand-me-downs, and have also made a habit of perusing the op shops and second kids’ clothing markets. It’s amazing how many near-new clothes you find for just a few dollars, or items that even have the tags still attached.
#3: Lose the pay TV. It’s a luxury that is costing you a pretty penny. With the growing number of channels on free to air, there’s a lot more choice for nix on the box these days. And if you do the sums, you’ll probably find that even hiring a few DVDs a month is a lot cheaper than pay-TV. If there is something you must watch – sport for example – try to arrange to see it at a friend’s house who has got pay TV. As a last resort head out to the pub to see it – but be careful your beer bill doesn’t cost you more than your monthly pay-TV would have!
#4: Join the library. Now that you’re not watching as much pay TV you might have more time to read books – and you can do it for free from your local library. Check out their DVDs and CDs too. If your library doesn’t have what you want you can ask them to bring it in from another public library. In many areas this is free. In others they’ll charge about $2 or $3 to do it. Recently my three-year-old wanted me to get him a Gruffalo audio book. Instead of buying it, we asked at the library, and they got it from another library for us. We had to wait about two weeks, but it provided some great anticipation for my son, and cost us nothing.
#5 Quit the gym. Go for a walk/run/ cycle/swim instead. Now we are coming into spring, there should be ample chance to get out and about and exercise without having to pay for it. If you need motivation, try to arrange with a friend to exercise with. Make a date for something active, such as tennis, swimming or walking.
#6: Ditch the car. Get a bike, or opt for two feet and a heartbeat. I don’t mean sell the car, I just mean avoid using it when possible. Of course if you have two cars and think you can survive with just one, it might be worth offloading your second. Otherwise keep your fuel costs down by jumping on a bike when you can or for very short trips, walk. We have a Christiana trike, which is great for carting the kids around and also for heading to the markets on a weekend. If you live in an area where there are organised car pooling groups, it might be worth checking them out as an alternative to owning your own car.
#7: Entertain at home. Going out can be pricey, especially if you are buying alcohol too.
Entertaining at home can be just as much fun, and stress-free (and cheap) if you ask everyone to bring a little something to contribute. If you do head out for a meal, look for cheaper restaurants where you can BYO alcohol for a low corkage fee.
#8: Home brew is a go-go. Since my hubby started home brewing a year ago, I reckon we’ve saved a small fortune in beer. If you’ve got a green bent, it’s potentially better for the environment too, because you’re reusing the bottles and not paying for all that heavy ready-made beer to be shipped about. If you are a wine drinker, try to save money by buying wine in bulk.
#9: Holiday close to home. Look for cheap options, such as camping, staying in caravan parks, or house-sitting for friends and family. Try to get something with kitchen facilities where you can make most of your meals – eating out can be a significant cost of holidays.
#10: Grow a few vegies. It can be pretty simple to grow some herbs in the garden (or pots) and a few basics such as spinach, lettuce and tomatoes. Pottering about watering and weeding them can also be relaxing after a stressful day at work.
#11: Babysitting circle. If you’ve got young kids, considering swapping babysitting services with friends. We have a magnet system where we use magnets as payment. Each family starts with four magnets. We often babysit the kids in their own home, in the evening. So one parent stays at home with their own children, while the other minds the second family’s children. It works a treat. You can arrange for the circle to work with several families or you could have your own arrangements with a couple of different families, as we do.
#12: Limit your mobile phone calls. If you’re bursting out of your mobile phone plan each month it might be time to examine your habits. Can you limit your conversations or cut down your texting to save money? Or could you email or skype someone instead?
#13: Pre-made is pre-paid. Go for fresh with food where you can. Don’t get caught out buying pre-made things such as soup. It’s pretty easy to chuck a few vegies in a saucepan along with some stock powder and boil it up. Pre-made sauces (the add meat and vegies variety) can also be an expensive choice that could be replaced with a few basics such as stock powder, cornflour and garlic. It’s always good to make sure you’ve got a few basics in the fridge or cupboard so you’re not tempted to get take-away – even if it’s as simple as tinned fish, a cheap packet of pasta and sauce, or baked beans on toast as a stopgap.
#14: Buy a water bottle – and use it. Buying bottled water is crazy when you can refill from a tap. And resisting soft drinks, juice and flavoured milk will also save you plenty of money over time. Drink some water and eat an orange instead. It’s a lot cheaper, and better for your waistline too.
#15: Pack your own. Whether it’s work or an outing, there’s no doubt that food brought from home is going to be cheaper than lunch on-the run. It can get a bit tedious at times, so allow yourself to go really wild on occasion and buy takeaway. Otherwise bring your own and watch your mortgage start to be whittled away.
Original story by Carolyn Boyd, a property journalist and keen follower of Australia’s housing market.
https://madeleinehicks.com.au/wp-content/uploads/2010/09/How-to-lose-the-mortgage-millstone.jpg514774adminhttps://madeleinehicks.com.au/wp-content/uploads/2019/08/Madeleine-Hicks-Real-Estate-Brisbane-300x64.pngadmin2010-09-02 07:07:322018-03-01 14:47:38How to lose the mortgage millstone
WARMER weather will combine with other favourable conditions to fuel the appetites of potential property investors, according to Australia’s largest independently owned mortgage broker.
The latest Australian Bureau of Statistics housing finance report saw the value of investment housing loans drop for the first time in four months in June 2010 by a seasonally-adjusted 3.6 per cent to $7.3 billion, the lowest value reached since February this year.
However, this compared favourably to $6.5 billion in June last year.
Many market commentators say this buyer group had been holding back until the election was over and the traditionally strong spring selling season begins. They won’t have to wait much longer.
Mortgage Choice senior corporate affairs manager, Kristy Sheppard says that according to RP Data, Australia typically sees higher than average property activity from September through to November.
“This year should be no exception, despite a possible lag effect from the hung parliament,” she said.
“There are already more properties on the market than usual at this time of year.
“That is good news for prospective investors, as is property prices plateauing in many areas and dropping in some; rental prices increasing; strong population growth continuing; consumer sentiment rising and the sharemarket continuing to be unpredictable.
“Housing undersupply is a serious issue in Australia and ABS building approval figures show a fall for a third consecutive month in June to reach the lowest level since August last year.
“Hence, many investors believe the long-term potential of property as a stable asset class is excellent.
“With fewer new properties there is bound to be a pick-up in rental price growth — we are seeing that happen already.
“Australian Property Monitors Rental Market Report for the June 2010 quarter shows that from April to June, rental prices for houses rose nationally by 0.7 per cent, bringing annual growth to a relatively small, but very encouraging, 3.1 per cent.
“The unit market was stronger, with rents increasing nationally during the last quarter by 3.5 per cent, bringing the annual growth rate to 4.2 per cent.
“This bodes well for people who research the property market thoroughly, have a long-term strategy in mind and investigate all their finance options so they make a sound investment decision.
“Prospective buyers must be aware that lenders have tightened loan assessment criteria for investors as well as owner occupiers.
“Many have limited their loan to value ratios to 90 per cent of the purchase price for both buyer groups, with some going even lower.
“Also, genuine savings are essential, whether in the form of a cash deposit or existing property equity.
“Both buyer groups will need to plan ahead to satisfy their chosen lender’s requirements.
“Preparing for rate movements is also vital to the planning process.
“The cash rate will probably remain stable for the next couple of months but many lenders are signalling that funding costs may force them to raise borrowing costs independently of the RBA’s rate cycle.
“It will be interesting to see how many Australian investors spring into the property market over the next quarter and what effect, if any, lender rate rises will have.”
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The level of household debt in Australia has risen over the past three decades from less than 50 per cent of household disposable income to about 150 per cent.
Ric Battellino, the Reserve Bank of Australia deputy governor, has sought to allay concerns that this indebtedness means we face a risky unsustainable outlook. He said that 75 per cent of household debt was held by the upper 40 per cent of income-earners.
The bank’s governor, Glenn Stevens, had earlier given the RBA’s estimate of Australia’s dwelling price-to-income ratio, which found that dwelling prices in capital cities were typically 4.8 times disposable household incomes – about half the ratio put by the doomsaying international survey Demographia.
The Commonwealth Bank chief executive, Ralph Norris, was asked after the bank announced a $6 billion profit last week whether the housing doomsayers were nuts.
”I wouldn’t go as far as to say they’re nuts but I think that it’s very easy to make assertions based on averages,” he said. ”You come to a different view when you look at the fact that the incomes based around averages are not relevant to the average person that has a mortgage.
”So you know, we’re in a situation here where, in my view, the housing market in Australia is healthy.
”There will obviously be variations in price and we shouldn’t be surprised if there are, you know, drops of 5 per cent or 10 per cent, as there are obviously increases in value.
”But I think the range of value is not going to be anything that suggests a bubble and a collapse of the housing market in Australia.”
Deutsche Bank issued a research paper last week suggesting Australia’s house prices were not as vulnerable as doomsayers argue.
While acknowledging that on many comparisons Australia had a high house price-to-income ratio and high levels of household debt, the Deutsche Bank economists Phil O’Donaghoe and Adam Boyton argued the vulnerability of Australian housing was ”overblown”.
”The housing market is perhaps the most common vulnerability we are asked about in the Australian economy,” the said.
”Combined with the role played by the US housing market in the financial crisis, investor awareness and suspicion of this key asset class is perhaps understandable.
”But we have long held the view that a broader assessment of the Australian housing market offers a more sanguine conclusion.”
The Deutsche Bank report noted that mortgage debt obligations in Australia were fully recourse loans and borrowers’ mortgage obligations extend beyond the mortgaged property, therefore providing a greater incentive for repayment relative to the United States.
Battellino suggests the strongest evidence on the sustainability of household debt was the low level of arrears. This was evident again this week in housing repossession data.
Repossession actions lodged in the NSW Supreme Court for the first six months of 2010 totalled 1198.
There were 3800 last year and 4000 during 2008. The peak year was 5300 in 2006.
Foreclosures in the US rose 4 per cent from June to July, exceeding 300,000 for the 17th month in a row, according to RealtyTrac.
The number of foreclosure activities, which incorporates all phases of foreclosure including default notices, scheduled auctions and bank repossessions, totalled 325,229 in July.
Lenders seized 92,858 properties last month, the second highest monthly total since RealtyTrac began tracking repossessions in 2005. Total foreclosure activities reached 1.65 million in the first six months of 2010.
Deutsche Bank noted that Australian house price concerns were ebbing. ”The pulse in housing finance has moderated in line with rises in the cash rate. The housing cycle points to a steady moderation in price pressures.
”Elements of the market which had been described by the RBA earlier this year as demonstrating elements of ‘considerable buoyancy’ have moderated. Auction clearance rates have also slowed.” From a peak of 72 per cent at the end of last year, auction clearance rates had fallen by last month to 61 per cent, Deutsche said.
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