It is not surprising that Australian investors wonder ‘where to next’. The banks seem to have taken it on themselves to set their own interest bar now so although this has downsides, there are also upsides in that investors are showing more enthusiasm for seeking more cost effective loans. They are out there and we encourage investors to do this.
Along with that is the high Australian dollar which is not encouraging overseas travellers to visit our fair shores and spend their hard earned dollars. Also manufacturing is taking a hit for the same reason.
Mortgage Stress and Refinancing
At We Find Finance, the finance arm of our business, we see more and more people refinance and customers who are happy with their new finance deals. There are not the big payouts like there used to be and refinancing may be the answer to you getting that extra cash or cash flow that you require to make your next move, whether it be for your business or to purchase another investment property.
Property Improvements to Increase Rental Income
There are also other strategies, the most popular being property upgrade, which helps an investor increase rents. Check this out at this article.
What is also exciting is that our We Find Finance website has been revamped so why not visit it and see what there is on that site that could be of interest to you.
Just copy and paste into your browser: http://wefindfinance.com]]>
Many investors do it on a ‘professional’ basis, in other words to make money as soon as they buy a property and then sell it on, but other investors will renovate to improve a property after several years in an effort to add value to the property, which also allows the landlord to charge a higher rate of rent.
If you have a strong inclination and skill for renovation you may do the job very well and be 100% satisfied with the result, but many people who take on a renovation job have not got that skill, nor do they have experience with hands-on type work.
All that aside, one very important point that a renovator has to keep in mind is to ensure that the renovation does not over capitalise the property.
In case you are not sure what I mean here, it is when the actual building has had so much spent on it that the building is overvalued when compared to other properties in the area.
Usually the bare essentials, the actual number of rooms, garages, etc. will add to the value of the property, but overcapitalisation usually occurs when a person uses upmarket products within the house which do not add practical value to the house.
By this I mean they may own an investment property in an average priced suburb but then go ahead and put in marble bench tops, gold coloured taps, an ensuite with spa bath, shower and all the trimmings, slate floors, etc. You get the picture, in other words top fittings in an average house.
Consequently the renovation may cost $65,000 whereas if cheaper, but elegant fittings were used, no spa bath or marble bench tops, etc., then the renovation may have only cost $55,000. This makes an awful lot of difference when one is trying to sell a property.
Even as far as a rental goes, an investor would most likely be looking for a higher rental to get a return on the outlay, but the property is in a lower standard housing area, therefore may have trouble letting it to a person who could afford the higher rental.
The moral of the story is: when renovating, cost everything you plan to do, work out the final value of the property and check to see if it is a viable proposition.]]>
It would be fantastic if everything we touched, real estate included, turned to gold and that there were no problems along the way.
But we have to get real!
Sometimes it is takes looking past the problems of today and focusing on the future to keep a property investor motivated.
Property investing, like anything else, can come with problems and there will be times that you get really upset about losing some money because you may have made the wrong decision or the tenants that you have put in a property have let you down.
I know, we are not meant to get emotional about property investing, but hey, you have worked hard to buy that property and if your tenants get behind in rent and you are having problems, it is hard not to be affected by that, or even take it quite personally if you know the tenants or they have been referred to you by someone you know.
Apart from tenants there are many other problems that could cause you to lose money, such as needing to renew wiring, unexpectedly finding that termites have attached the house and other such eventualities.
Motivation is the key to growing a property portfolio. Like everything we do we need to keep motivated to keep moving forward.
Here is an excerpt from a property investor which I think explains exactly what I am saying:
“Today I was feeling a bit frustrated about the non payment issue. I made myself feel better about the situation purely by accident. This happened when I opened up the envelopes sent to me by the mortgage companies and took a look at a number of the mortgage statements for my properties.
When I saw how much my mortgages had been paid down over the past year, and when I reflected on the total appreciation of my portfolio, I felt a lot better. The non payment of rent issue really did then feel like just a small tiny little bump in the road.” Neil Uttamsingh
When buying your home this date is probably not that important but when you are buying an investment property that date can make a huge difference to your tax refund.
Sale Date Of A Contract
A contact to purchase should not be dated until all parties have agreed to all terms and conditions of the contract and all or any changes made on the contract have been signed off by the seller and the buyer.
At this time the Contract should be dated and this date is the DATE OF THE SALE OF THE PROPERTY.
Take for example that a contract was drawn up on the 15th June 2012 and negotiations took several weeks to come to fruition. By the time negotiations and contract changes had been made it was now the 3rd July 2012. The date could then be put on the contract.
This means that the contract sale was made on the 3rd July 2012. Now if the purchaser had wanted the sale to be in the 2011-2012 financial year to get the maximum tax benefits then the sale negotiations needed to have been completed and the contract signed by the 30th June 2012.
If purchasing at the end of the financial year with the intention of getting tax benefits then make sure that the contract is signed AND DATED before 30th June.
The settlement date is not the date that is deemed to be the sale date as far as the ATO is concerned.
So this means that if you went to contract on the 20th June 2011 but did not settle until 15th September 2011, you will get all the tax benefits in the current financial year of 20th June 2011.
This can be a huge advantage for a property investor. It means that their tax refund will most likely be much bigger than had been anticipated and when the refund comes in it can be used for mortgage payment or refurbishment if you so wish.
Of course, all is relevant to your income and your taxable expenses.
Other Dates Of Significance On The Contract
Another point that needs to be recognised with dating contracts is that many of the clauses, such as finance and pest control, may state “within 14 days of the contract date” for approval so you don’t want an agent dating the contract when you, as the buyer, signs the contract because it could take a week to get the final agreement to the terms and conditions of the contract..]]>
With these thoughts in mind I thought I would tell you about an article I read a while back.
A property investor who, with her husband has a large number of properties and through the difficult financial that have occurred over the past couple of years have made decisions regarding their rental properties that they have not made before.
I found this rather interesting in that it is something that has worked for her, and I can see the advantages of it.
Here is what happened:
“A tenant of theirs that had been renting off them for quite a number of years. She always looked after the property very well but she had been denied a rental assistance that she had been getting in the past. This left her in a position that made it very difficult to afford the property.
The writer and her husband decided that as she had been such a good tenant and with her care of the property they had paid out very little in maintenance. Another consideration they took into account was that if they gave her notice to leave they could end up with a vacant property for several weeks in this financial climate and the location of the property.
The final outcome was that they rewrote the lease, reduced the rent, and put her on a month to month agreement on a trial basis in an order for her to prove that she could pay the reduced rent without any problems.”
This so far has worked out a satisfactory arrangement for them, but is one that needs to be worked through and would only be offered to a tenant that you have had dealings with for several years, you feel you can trust to come good or whose circumstances prove to be temporary.
The majority of tenants do not intentionally, not pay their rent and if there is a good history there may be a way to get around the temporary difficult circumstances without both parties being affected financially.]]>
Different Money Personalities
Have you ever stopped and looked at, or listened to a number of people discussing money and thought about the different attitudes that people have regarding finance?
There are the gung-ho gamblers who believe that whatever they do will be right in the end and at the other end of the scale there are the very conservative who will agonise over every dollar they spend, or worse still, only think of spending cause they never actually get around to spending!
You may like to read an article by Brent Kessel, MSN Money where he says:
“The answer is what I call a person’s money makeup — a powerful set of ideas, formed early in life, that govern spending, giving and investment decisions. And understanding these forces is the key to changing bad financial behaviours for good.”
He has created 8 groups from his discussions with people from various walks of life and also in this article you will be able to quiz your money type.
It is a very interesting article and quiz, and gives you food for thought about your approach to property investing.
I recommend that you visit this article and have a think about your approach to property investing and financial matters. It may explain why you have jumped into a commitment when you shouldn’t have, or just the opposite, held back when in actual fact you felt that you had all the information you needed anyway.]]>
Alternatively their real estate experiences may have them choosing a different course altogether, especially if they are or have been involved in the building trade.
Another factor which impacts a decision is the age of the investors because one would choose a different strategy if they were buying in their 20′s as opposed to a person buying in their 50′s.
Here are a few to consider:
THE MOST POPULAR
FOR THE VERY EXPERIENCED
It is so important that you decide on your property investment strategy before buying as to buy and change the strategy for a particular property can be very expensive. There is no problem, although not often recommended unless you are an experienced investor, in changing strategy for each property because then you will be buying the right property for that strategy to work for you.
For example, you would not purchase a buy and hold property in good condition (which would most likely be bought at near top dollar) and then renovate because you would not make much profit or increased rental return, but you would buy a property in need of maintenance or at least refurbishment, to renovate and you should be able to get this at a cheaper price allowing you to either get a higher rent and better cash return on the property, or sell it at a profit.
Once you have your finance organized and made this decision you can then focus on exactly what you need to look for in your investment property.]]>
So if you want to lose money in your property investment business just follow these guidelines and it is sure to happen!
CHECK OUT THESE ‘DON’T DO STEPS’
Choose a property in the worst area – that will attract the worst kinds of tenants and your rent will also be lower than a similar property in a better area.
Do any of these steps sound familiar to you, I hope not. If they do you need to get organised and rectify any problems you have as soon as possible.
To find out more about the right way to go about buying a rental property give me a call on 1800 600 890 and ask for Paul]]>
There are several reasons why they don’t go ahead and purchase and one of them could be their psychology, but the other could just be pure and simple – confidence.
We will look at the psychology of investing next email, but in the meantime here are some tips to help you overcome analysis paralysis and get into building your financial independence.
The First Steps
The following tips are designed to help clarify how to go about short-listing when buying investment properties but before even these stages are taken seriously an investor needs to know exactly how much they can borrow and what price property they can purchase and what rent they will need from a property to meet their expenses (with or without some weekly input from them, depending on the investors circumstances.)
Planning to buy to rent
Working on the basic theory of buying a property and installing tenants we will discuss the factors that will make a good investment property.
• look at the rental availability in the area – it is best to find somewhere with a low vacancy, i.e. a high demand for rental
• look for an area that has a housing shortage as this will mean that housing prices will keep stable and more than likely have a good capital growth
• areas where there are plans for massive construction or industrial growth like a mining town with a new mine or a regional town that is going through growth like Toowoomba
• look at areas where land is scare, e.g. the CBD
• if buying into a house and land package, buy in the first stages and check that the demand for housing in that area is high – the earlier stages have a higher probability of increased capital growth (new house and land packages also have a good depreciation rate for tax purposes)
• look for opportunities along good transport links into a CBD – rail lines are always good – sometimes these areas are excellent to find older houses for renovation or buy now in this good position and renovate later when funds area available
Once you have found the area in which to purchase:
• decide who your tenants will be – in other words if you are going to invest in a mining town you may buy to cater to the single person or to a married couple whereas if you buy in an outer suburb of a large city your tenants will most likely be a family
• if you buy for a family ensure that the property you buy is suited to a family with sufficient bedrooms and other facilities – the better the facilities the better rent you can ask
• if looking for a family as tenants then make sure the property is near essential services like schools, shops, medical care and transport
• if buying the CBD you ideal tenant may be a Gen-Y junior or middle manager who will require the latest in technological connects, e.g. internet links in several rooms and plenty of power plugs for their audio equipment and the like
Fitting it all together
Obviously in deciding on an area in which to purchase, the price also has to comply with your funding ability. There is no point getting all excited about buying a CBD property if you cannot meet the higher prices of a CBD investment.
The idea is to start short-listing down until you find an area you can afford and a property that you can afford in that area.
Then last of all, the suburb and street to purchase should also be desirable. Not all streets are! Even a great suburb can have the odd street that it is advisable to stay away from because of certain factors in the street that are not inductive to property increases.
You know, you don’t have to feel on your own with this decision!
Quite simply, contact me at email@example.com and I can offer you a free consultation to help clarify your investing needs.]]>
When it comes to the letting of a property all sorts of problems can be arise, but most of them arise through incompetent property management.
Finding the right tenants is a large part of having a rental let that goes smoothly.
What many investors do find is that older tenants make good tenants. Tenants in the 55+ age bracket who are working, are generally more stable, and have some sort of accountability and responsibility.
With the rise of baby boomer numbers heading towards retirement many of them are looking to find properties in which to live for several years and in relative comfort. If you can find tenants in this age bracket you will most likely have some very good tenants for several years to come.
The types of properties they will probably be looking for are fairly small, with low maintenance gardens.
Apartments are also quite often in demand from this age of tenant as they may not want to have the responsibility of gardens to look after.
In saying that, some young responsible adults in are also very good tenants. A large part of having responsible tenants is getting quality references AND checking them. Make sure your property manager is putting time into this and ask for written replies.
Regardless of any age of tenant you may look to sign up, references are a very important part of finding the right tenant.
With discrimination laws in place it is a little difficult to get a good reference. To get the right answers you need to have questions phrased in such a way that the answer is a ‘yes’ or a ‘no’. Such as, “Did they make all rent payments on time?”
One question that will often give you the answer to many queries you may have is:
“Would you let a property of yours to this tenant again?”
Even if you assign a property manager to look after the property always make sure you familiarize yourself with the tenancy rules in the state in which you purchase.]]>