Manage Your Investment Property?
Nov 20th, 2018 • Industry News
Manage Your Investment Property?
8 Tips for Investing in Interstate Property
Jul 31st, 2018 • Industry News • Investments
If you live and work in one of Australia’s major capital cities, you are probably finding this task increasingly difficult in your local market as both prices and competition continue to increase.
To Rent or Buy?
Jun 8th, 2018 • Industry News • Home Loans
Pros of renting
- You can live wherever you want
Career and lifestyle are important considerations, whether you’re single or a family. Renting a place in a suburb or location that is close to your work, friends and ideal lifestyle amenities (like schools or shopping) can often be much more affordable than buying there.
- Flexibility
If your work or lifestyle require you to be ready to up stumps and move at short notice, then renting gives you greater flexibility and mobility. Or if your situation changes and you find you need less expensive digs, you can quickly find a rental that fits your new budget.
- Lower costs and less hassle
Renting is usually cheaper than buying and you won’t have to worry about ongoing expenses like rates, body corporate fees, maintenance, repairs and building insurance.
Cons of renting
- The ‘dead money’ argument
Have you ever heard the phrase ‘rent money is dead money’? Many argue it’s much better to pay off your own home loan than someone else’s. It’s certainly true that capital gains on a property can potentially grow your wealth, and you can look forward to living ‘mortgage free’ within 25 – 30 years.
- Restrictions
Common complaints from renters include living with the landlord’s décor, not being able to put hooks in walls, restrictions on pets, or even the number of people who live with you.
- Uncertainty
Rental properties don’t offer long-term certainty. Moving can be expensive and you’re vulnerable whenever the lease ends or the landlord decides to renovate or move back in.
- Inspections
Most rental properties require you to submit to inspections by the landlord or agent every six months. These can be stressful and inconvenient.
| What the statistics say * Based on the 2016 census |
|
|---|---|
| Percentage of Australians renting | 30.9% |
| Percentage of Australians who own their home outright | 31% |
| Percentage of Australians paying off their home | 34.5% |
Pros of buying
- Freedom to do what you like with the property
Buying your own property means you have the freedom to do whatever you want with it. You can decorate any way you like, and add value by renovating.
- Capital gains and wealth-building opportunities
You’ll own an asset eventually, and while you’re paying it off the property could potentially increase in value. What’s more, you may be able to use the equity in your home to build wealth through property or other investments.
- Certainty
You’ll have the security and certainty of knowing where you’ll be living for years to come. You’ll also obtain a degree of financial certainty – because you’ll own a substantial asset.
Cons of buying
- Affordability constraints and costs
High housing prices and low wages growth have made buying difficult for some people. However, there are incentives available like the First Home Owner Grant to help you get started. Ask us if you’d like to know more.
- Added responsibility
Becoming a home owner means you’ll have new financial responsibilities (such as paying your mortgage repayments and bills in a timely manner).
- You may not be able to afford to buy where you want to live
As a home buyer, you may have to compromise on location or property type to find a property that suits your budget at first. However, once you get a foot on the property ladder, the potential capital gains could help to make your next property purchase more ideal.
Just because you want to live close to the action doesn’t mean you have to forfeit your dream of owning property. Rentvesting is a strategy that allows you to live where you want and buy an affordable investment property elsewhere! You could potentially get a foot on the property ladder now, enjoy the benefits of capital growth and having a tenant to help you to pay the mortgage, but still live wherever you like.
Talk to us about what’s right for you
Whether to rent or buy comes down to your personal situation and goals. If you’ re considering buying, then talk to us and we’ll help you decide what’s right for you. Keep in mind that even if you don’t have a 20% deposit saved, there may be other ways to get you over the finish line to buy a home or kick off your rentvesting strategy. We’re happy to explain everything you need to know, so please get in touch today!
Can a Boarder Help You Pay Your Mortgage?
May 4th, 2018 • Industry News
Taking on a boarder could be a viable way to help you pay your mortgage, but it won’t all be beer and skittles! If you’re going to take in a boarder, there are some very important implications to consider first, as we explain in this article.The pros of having a boarder
- Additional income
- You can offset your household costs
- Potential tax deductions for property expenses
- The social factor.
- Loss of privacy
- Extra responsibilities as a live-in landlord
- The income may push you into a higher tax bracket
- You may be subject to Capital Gains Tax (CGT) when you sell
- Many lenders don’t take rent from roommates into account when assessing whether you can afford a home loan.
Legalities to consider
The money received from your boarder will generally be considered accessible income by the Australian Taxation Office (ATO), and you must declare it on your tax return. You may be able to claim deductions for expenses associated with renting out part of your home, such as interest on your mortgage. However, if you rent to a relative at a discounted or less than market rate, it can affect what you can claim. In some instances, payments from a family member for board or lodging may be considered a domestic arrangement and not rental income, so you may not be able to claim tax deductions.
You won’t have to pay Goods and Services Tax (GST) on the rent you charge, nor will you be able to claim GST credits. However, when it comes time to sell, you may not be entitled to the full main residence exemption from Capital Gains Tax (CGT) - generally you don’t pay this when you sell the home you live in. You can find more details via the ATO website, however, it’s wise to speak to your accountant about the financial implications before proceeding.
Precautions
It’s also important to familiarise yourself with your rights and responsibilities, and those of your boarder. Contact your local tenancy authority for advice. You’ll also need to follow the rules about lodging the bond with the residential tenancy authority in your state or territory.
Having a solid contract or tenancy agreement in place will help protect you, should things go wrong. The agreement should stipulate exactly what’s included (e.g. furniture and parking), when and how rent is due, details about notice required and room inspections, and bill arrangements. Also, consider your insurance needs. We partner with some of Australia’s leading insurance providers, so please ask us for help.
When interviewing candidates, be sure to ask plenty of questions and request references from previous landlords (even if it’s someone you know). Being clear from the start will help you avoid issues down the track. Talk openly about your expectations about things such as:
- privacy
- paying rent
- noise
- cleanliness
- overnight guests
- Lastly, before they move in, fill out a condition report and take photographic evidence.
Becoming a live-in landlord can help you pay off your mortgage and cover living expenses, whilst also allowing you to claim tax deductions in some instances. However, there are important implications to consider, which is why it’s so important to consult your accountant or financial planner first. If you’d like to know more about your finance options for purchasing your home, please speak to us. We can help you find a home loan that suits your specific financial needs and goals – and perhaps make it affordable without Cousin Jimmy’s contributions!
Should I Buy An Investment Property Now?
Feb 12th, 2018 • Investments
Last year saw some major curveballs thrown to property investors, which may have left you wondering whether a property investment strategy is the best way forward. These changes included the tightening of controls on banks for investment lending by APRA, particularly for interest-only loans, changes to negative gearing laws, and there was a slowing capital growth trend in some parts of our property market throughout the year.But despite these uncertainties, if you are in a good financial position, right now could be a good time to invest in property. Here’s why.
National rents are on the rise
Deciding if an investment property is a viable investment often depends on the rental market for the property. For many investors, this is more important than how quickly the property makes capital gains. The good news is that rental rates are on the rise, according to the latest CoreLogic Rental Report. It found that over the December quarter, all capital cities except Canberra experienced a higher annual increase in rents over the past year, compared to the same period for 2016. The same was true for regional markets. If the rent covers the expenses and generates cash-flow, you should be in a good position to hold on to the property until its capital growth value meets your target for selling.
There is less competition amongst investors
In the past, foreign investors gave a lot of competition to local investors which has tended to drive up prices. Sales in new developments are now capped at 50% to foreign investors – and investors are only permitted to purchase new build properties if they are a permanent resident of Australia. This could potentially leave the market open to opportunity – particularly to those prepared to invest in established homes. What’s more, further penalties may apply to foreign buyers if they leave their investment properties vacant.
Savvy investors could come out well ahead
If home values in the market you are considering are slowing, you may have more capacity to negotiate the price with the seller and perhaps snap up some bargains. According to CoreLogic, previous downturns have seen the annual number of sales fall by around 20-25% from peak to trough, and with fewer buyers in the market, sellers may be more willing to drop their price.
Some markets are booming
Just because dwelling values may have declined a little in some markets, it doesn’t necessarily mean this will happen in all of Australia’s property markets. Some locations are still making excellent capital gains – the key is to do your research and find the right property in the right location. Take Tasmania for example – Hobart experienced double-digit value rises last year, ending at +11.5%!
Keep in mind that lenders are very specific when valuing a property. They make an assessment right down to the suburb, street and house. You should do the same. Consider the capital growth potential and the rental market.
A fall in prices won’t spell disaster if you get your finances right
Whilst analysts are expecting a general slowdown in national housing market conditions in 2018, the beauty of property investing is that you can usually weather the storm (if there even turns out to be one). Experienced investors know the property market will always fluctuate – so being in control of your finances so you can control when you sell is key. A good loan strategy is just as important as your buying strategy, so talk to us about your finances to ensure you’re in a secure position before you make your next move.
We can help!
In a softening market, a savvy property investor will take a longer-term approach. It’s important to be aware that if you are taking a short-term approach to property investing, falls in home values are more likely to affect you. If you’re planning to renovate and sell or flip properties quickly, you should be careful about the costs involved. If the value of the property should fall, you could potentially make a loss, so talk with us about these costs before you get started.
As your mortgage broker, we’ll help you crunch the numbers and make informed decisions, then line you up with an investment loan that suits your individual needs. Property investment is still a reliable way to grow wealth - interest rates remain near historical lows and if needed, you can still access competitive interest-only loans with our help, so please get in touch today!
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loans are subject to lenders terms and conditions – fees, charges and eligibility criteria apply.
Source:
https://www.corelogic.com.au/resources/
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