Tag Archives: invest

How to help your children up the property ladder

How to help your children up the property ladderFor anyone trying to buy a home in today’s market, recent conditions aren’t particularly accommodating. According to the Housing Industry Association’s Affordability Report, the affordability index dropped by 6.4 per cent over the December quarter. This has pushed the rating to 75.6 (a score of 100 represents a balanced market). A mix of incredible price growth and a supply shortage has helped see to this.

In these circumstances, young first home buyers could find it tough to break into several city’s markets, and are often being priced out of their own region. If your kids are struggling to get a foot on the property ladder, there are a few ways you can lend a hand.

Let’s take a look at how you can do this:

Putting a deposit

CoreLogic’s monthly indices show that the average value of houses across Australia’s five biggest cities was $757,330 by the end of January. In Sydney, Australia’s densest city, this figure was a whopping $993,770. Clearly, buying real estate in Australia is more costly an affair than its ever been, making it a journey just to save for the initial down payment.

If you want to invest into the future of your children, why not give them a one-off cash gift that will go toward a deposit. Not only are you speeding up the saving process for them but keeping them motivated and with their eyes on the prize.

Put your home as collateral

For those picking up a home loan for the first time, lending conditions aren’t usually in their favour from the get-go. With no property of their own to put as collateral should things go south, they present a greater risk toward lenders.

If your child is in this situation, it can help immensely to put yourself forward as a guarantor. This means that you’ll put your own home down as collateral for the mortgage, which can help lower the minimum deposit that they have to commit by quite a bit. It could help them to buy a homeand get a foothold in the market much quicker, as well as keep them motivated.

The great thing is that it won’t cost you a cent, but can fast-track your child’s property journey significantly. However, there are obviously big risks to this. Just make sure they have the income and financial stability to make those repayments or you could, in the worst-case scenario, lose your home. Speak with a financial adviser to see if such an approach is right for you and your young adult.

Why is investing in a holiday home a smart move?

Why is investing in a holiday home a smart move?As most real estate experts will tell you, building your property portfolio is a smart way to invest your money because land, like gold, retains its value. This means that you are safely investing your funds, as the likelihood of a return – or even profit – on your investment is high given that property and land are always in demand.

For those of you who are looking to expand your property portfolio further by buying real estate in Australia, it might be time to consider purchasing a holiday home. There are both financial and health benefits to be enjoyed by doing so.

Financial perks of a holiday home

In many ways, investing in a holiday home is the gift that keeps on giving because even when you are not using it, you can rent out the property to other holidaymaking families. This is where location, location, location comes in - consult with an agent to find a holiday home that is near the beach, parks, gardens or tourist attractions of a city to ensure you’re getting as much rent money as possible on a weekly basis. Sea views are a great calling card for renters.

Simply take your house off the rental market when you and your family want a vacation, so you can all enjoy the nearby amenities, too!

Health benefits of a holiday home

Interestingly, a study sponsored by Nuffield Health found that taking annual leave, or having regular holidays, can dramatically improve our overall health and wellbeing. In addition to being positive by releasing endorphins and dopamine, the chemicals that make us happy, going on holiday can reduce our blood pressure by 6 per cent on average, according to the study’s findings. What’s more, our sleep quality can also improve by up to 17 per cent.

What are the latest green trends in housing?

What are the latest green trends in housing?As going green and adopting sustainable development methods are increasingly becoming popular in the real estate and housing construction sectors, several trends are emerging. Here we take a look at what these trends are, and what they mean for the real estate sector  across the country.

Australia and green building goals

In Australia, the Climate Change Authority has set an emissions reduction target of 15 per cent below the levels of the year 2000, to be achieved by 2020. Looking ahead to 2030, this target increases to between 40 and 60 per cent below 2000 levels.

Despite these goals, renewable energy sources aren’t being used as often as they should. Indeed, a recent Energy White Paper produced by the Department of Industry and Science found that only 6 per cent of the total energy consumption over 2012-2013 was generated from renewable sources.

While there is room for things to improve, the biggest positive is that Australians are wanting a greener future for their homes.

Trends in green housing

A whopping 87 per cent of people living in Australia would like solar panels installed on their homes, according to a report by independent market research company Ipsos.

In addition, geothermal energy is also a fairly popular choice, with 45 per cent of people interested in using the heat from below the Earth’s crust to supply warm water to their homes. Geo-exchange pumps are increasingly being used in housing construction, built under the house to transfer the natural heat from underground to the water inside the pipes before residents can shower or wash dishes.

“The results show Australians strongly support renewable energy and demonstrate the importance of involving and consulting locals,” stated Australian Renewable Energy Agency CEO Ivor Frischknecht.

Impact on buying real estate

It can prove to be fruitful to keep these trends in mind when planning to buy real estate. With more and more people attracted to green energy when buying real estate, both agents and buyers can keep note of the value of a home if it comes with environmentally friendly features.

For first home buyers, investing in a green home might at first glance feel like an extra expenditure or outside the budget, but it may in fact end up costing you less in the long term. For instance, a study published in the International Journal of Global Energy Issues found that solar water heating can pay for itself five times over, making it a sensible investment.

Why not invest in a home with solar friendly features already included and reap the benefits for years to come?

Lending for real estate improves

Lending for real estate improvesInvestors have taken an increasingly active role in the Australian real estate scene, but it looks as though owner-occupied finance is on the road to recovery. Finding the balance between the two hasn’t been easy, but recently released figures from the Australian Bureau of Statistics (ABS) could indicate that the market is tilting back into alignment.

It’s hard to argue that investment hasn’t been rampant of late. CoreLogic RP Data analysis has revealed that investors commitments were worth $12.9 billion in March, a staggering 105 per cent increase in a little under four years. The Reserve Bank and regulators have been trying to get a handle on the insatiable demand for homes for sale, but ABS housing finance data suggests a change could be on the horizon.

Construction takes the cake

The total value of lending for property climbed 2.9 per cent during April in seasonally-adjusted terms, according to the ABS. Owner-occupied housing experienced a sizeable jump, rising 3.1 per cent over the month. Meanwhile, lending for investment homes rose a slightly slower 2.6 per cent.

Even more encouraging for the property market, the number of loans taken out for new home construction increased over the same period. There were 4.3 per cent more of these commitments recorded, as well as a 1.6 per cent jump in the number of loans for purchasing a newly construction property – a promising figure that Master Builders Australia has welcomed enthusiastically.

Chief Economist Peter Jones said this data could show that new home building is taking the lead in the finance department, which is encouraging for the supply of affordable real estate in Australia.

“The latest housing finance figures for April shows a welcome turnaround away from the focus on investment toward finance for the construction of houses,” Mr Jones said.

“The industry is looking to the non-investor sector to strengthen over the next 12 months to ensure that this rebalancing takes hold.”

What about first home buyers?

What’s more, the Housing Industry Association (HIA) hinted that first time buyers are becoming more active in the property market. ABS figures show that the number of loans for freshly-minted buyers as a proportion of all dwelling commitments rose to 15.2 per cent in April, up from 15.1 per cent in the previous month.

This might not seem like a big difference, but HIA Chief Economist Dr Harley Dale said it is the highest level seen in a year. It’s another encouraging factor for the property market, as it could indicate that these buyers are becoming a bit more confident in their pursuit of home ownership. In fact, Dr Dale suggested that the percentage figure could be higher if it were to include those first time buyers who get their start in the investment market.

If the popularity of housing finance for construction persists, the mix of property for sale can continue to expand – and young buyers may find themselves in a good position to look for houses for sale in the coming months.

How to pick a good tenant

How to pick a good tenantWhen you’re looking to invest in real estate to rent, one of the things you’ll need to have a think about is choosing tenants. It’s important to fill your vacancies, but often it’s equally important to choose the right tenants to suit your property. After all, you don’t want to be dealing with unreliable payments – or even damage! Here a few things to keep in mind when picking a good tenant.

Who’s your target market?

The first element to figure out is your target rental audience. You’ll need to consider your property’s physical features and where it’s located. For example, a spacious suburban villa will likely appeal to a different pool of people than a slick apartment in the centre of town.

Make sure you play up your property’s features in the listing! Attracting the right applicants can lay a good foundation and take some of the legwork out of the screening process. If there are schools and parks nearby, you can probably start narrowing your advertising to families, while an abundance of restaurants and cafes in the surrounding areas will attract a younger set of prospective renters.

Enlist some help

Choosing a good tenant isn’t always a sure thing, but the screening process can often sift a good tenant from a bad one. It’s useful to have a bit of experience and knowledge on your side when you’re going through applications. A property manager can also do a lot of this legwork for you, as well as giving you some handy hints about setting the right rental price

They can check references and delve deep into the prospective tenant’s previous properties. You normally need around three references on a tenancy application, so take the time to speak to past landlords and property managers. They can alert you and your property manager to any issues and confirm the renter’s reliability in paying rent.

No matter how thoroughly you screen a tenant, renting is unpredictable. Landlord insurance can be a safe option, just in case.

What to do with your property when you retire

What-to-do-with-your-property-when-you-retireRetirement is the beginning of a whole new stage of your life. But long before you decide to leave the workplace behind, you should consider what retirement will mean for you and your property. Here are a list of points to think about before you cash that last cheque.

Downsizing?

By the time you are thinking about retirement, it’s likely that will have substantial equity in your home. You might even own the house outright. Selling the family home is one solution to free up some money. It can be invested in a whole range of things – from shares to term deposits, to superannuation. But before you put the house on the market, think about what assets this leaves you with.

Your pension payments often depend on how much these assets are worth, so if you decide to vend your property in favour of something smaller any money you have left over could be counted as income.

Alternatives

The prospect of leaving all those memories and friends behind may seem unappealing, but there are a number of alternatives to selling up. Instead, you might decide to stay put. You could adapt the house into a dual occupancy, in which case you can live in one half and sell or rent the other. There’s also the option of renting out some of the rooms – but this could have some implications for tax and pension payments, so make sure to seek financial advice before moving forward.

As well, think about doing some minor renovations – you may encounter health or mobility issues down the line, so making the home easier to navigate and keep up now will help keep your independence much longer. It could be as simple as an extra railing on the stairs or non-slip mats in the bathroom.

Tips for finding a good investment

Tips for finding a good investmentProperty investment is a big financial commitment so you want to make sure you get the best bang for your buck. Whatever your long term investment goals, there are a huge array of factors to consider when choosing the ideal property. Here are some ideas to get the ball rolling.

Location counts

Finding the right location for your investment is half the battle. It drives the price and rental returns – and can make your foray into property investment a successful one. When you’re looking for a property do your research. Ask local real estate agents and property management companies about the health of the market. Glance across advertised rental prices and yields – and keep an eye on vacancy rate statistics.

Remember that trends are more powerful than individual results, so consider areas where high growth is expected.

There could be times when you can’t find tenants immediately but these statistics will prepare you for this. In any case, a low vacancy rate suggests you’ll find tenants easily. All this information can give a good idea of the demand for rental property in an area. Depending on your investment goal, you want an area where demand surpasses rental supply – after all, you don’t want an empty property!

Know your market

If you’re renting the property out, understanding your target market is equally important. Families have different preferences than young couples, while retirees are at the other end of the spectrum than students. Look for features that prospective tenants will like. Tenants might appreciate off-street parking, a garage or lots of storage space. It all depends on your target market.

Well-maintained properties often secure higher rents, so consider how much work you will have to do to bring the property up to scratch. A run-down or damaged property may not be worth the investment in the long run.

How do I use suburb reports and sales data?

How do I use suburb reports and sales data?There are a few things you can do to make the hunt for investment property a bit easier. Research is a large part of making a solid decision and there is a wealth of information at your finger tips. A number of housing agencies, industry bodies and local governments all release property information on a regular basis, but the amount of choice can seem overwhelming. Here are couple of tricks for using two of the most common information sources – sales data and suburb reports.

Sales report

Sales data can allow you to compare and contrast different areas to get a better feel for how markets are tracking. This information can help you in number of ways. For one, it can help you identify growth suburbs. These are areas where property prices rise strongly in a limited period of time – which is great for capital growth opportunities.

Sales reports can help you find out where values are strong, but don’t be immediately drawn in by a high median price. Keep in mind that a suburb that’s thriving now might not be doing the same in a few years time. Trends are especially important when looking at this information. Check for prices that have evened out or starting to head down – this can indicate that a suburb has reached its peak.

Keep an eye out for areas where prices are just starting to rise. Historic sales data can give you an idea of the growth cycle and point out areas that are potentially ripe for investment.

Suburb report

Once you’ve identified an area you like, a suburb report is a great starting point. They can help you discover more about the sector you are looking at buying into, or provide more detail on what the zone has to offer. It will normally include average property prices, advertised rents and even a demographic profile.

For example, it might show the number of schools, parks, transport hubs and other amenities. These are all things that potential buyers and renters will likely be looking for, and might even indicate price growth – especially if there are more facilities in the pipeline.

Make your home work harder for you

turn_you_home_into_an_investmentTurning your residence into an investment

Many Australian’s own their primary place of residence, but an increasing number are making the swap from living in their property to using it as an investment for their future.

There are a number of key factors that should be addressed to gain the maximum benefit from renting out your home. Investing in a tax depreciation schedule from a specialist Quantity Surveyor such as BMT Tax Depreciation will maximise cash returns on the property once it begins to generate income.

Your tax situation will be transformed

When an owner decides to turn their primary place of residence into an income producing property, their tax situation will change.

  • Expenses in holding the property will become tax deductible
  • If an owner has only rented their property for part of the year, deductions for this portion the year can still be claimed
  • If any improvements are made while the property is being rented, these may also entitle the owner to depreciation deductions

Common misconceptions

While it is true that newer properties may receive higher deductions, all investment properties will earn depreciation deductions for the property owner.

  • When a property is not brand new, owners will still be able to claim depreciation on the structural component for the remaining time within the forty year effective life period
  • Investors who own properties that are built before 15th of September 1987 can still claim depreciation on the fixtures and fittings within the property and include any recent renovations, even if the renovation was carried out by a previous owner

Capital gains implications

  • When a home becomes an investment property a Capital Gains Tax (CGT) event may be triggered if the property is sold
  • There are various situations were properties will attract a CGT exemption. It is best to discuss your CGT situation with an Accountant as each individual scenario is different

Consult with an expert

If you are thinking of making your home an investment property, visit the BMT Tax Depreciation property investor’s page on their website for more information by clicking here. Alternatively, you can speak with one of their expert staff on 1300 728 726 for obligation free advice today.

Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation.  
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.

3 reasons to get a granny flat

3-reasons-to-get-a-granny-flatWhether you are buying for the long term to settle down or purchasing property as an investment, there are many benefits of installing a granny flat on your property. You have to make sure you have the right space available to get it constructed, but if it’s a possibility, here are some great uses for this popular home add-on.

Bringing in the family

If you are an owner-occupier, there’s always the chance that you reach a point where a parent, or both parents, move back in with you. It’s a popular option that many prefer to having elderly parents live alone, or housing in a retirement village.

By constructing a granny flat, you offer your family the privacy they deserve, without crowding out your own home.

Housing ‘not-quite-there’ children

Sometimes, once they finish school, the kids aren’t quite ready to leave home. By having a granny flat on your property, you give them a living option before they take on the world of tenancy. You can even charge them minimal rent, easing them into the tenancy cycle while also boosting your own income.

Added rental home

If you have invested in real estate, adding a granny flat is an excellent way to increase your rent significantly. If regulations in your area allow it, you may be able to turn negatively geared property into a positive cashflow one, or bolster an already profitable house. There are space requirements for your land, and make sure you build far enough away from trees or fences to meet planning restrictions.

There are so many possibilities with the granny flat, and it doesn’t have to serve only one purpose over its lifespan. And no matter what use it serves, it will likely add value to your property, which is great when you sell down the line.