November's Australian Property Investor magazine cover is branded with The Annual HOT 100 Australian Hotspots. The cover story focuses on research by Peter Koulizos from TAFE SA, Cameron Kusher, senior research analyst from RP Data and Terry Ryder of hotspotting.com.au. 100 suburbs Australia wide are listed alphabetically, each representing one of the hottest suburbs in the country for investment. Joondalup is one of only 8 suburbs in Perth picked as 'hot'.
The article reads:
The Perth suburb of Joondalup is the kind of market Terry Ryder expects will prosper in the next phase of the property market."We've been through a period in the bottom end has been the most active sector and next will be the trade-up buyers seeking homes in price ranges one tier above the first homebuyer market," Ryder predicts.
"Joondalup City includes a cluster of suburbs with median house prices in the $300,000's and $400,000's. These suburbs have a pleasant environment between Lake Joondalup and the ocean, one of the most impressive CBDs anywhere in Australia - with extensive shopping, education, transport, medical and admin services. The transport interchange links train and bus services ad is integrated with a regional shopping centre. The big kicker for Joondalup is the State Government decision to name it the 'primary centre' for northern Perth in the Directions 2031 plan, which means government spending will be specifically targeted on this centre."
Most of us have already discovered the City of Joondalup is a great place to live and above is a pretty compelling article in favour of it also being a great place to invest. With rates still low and rental returns still impressive, now may be the best time for you to get into the investment market - right here in your own neighbourhood! Speak to a mortgage expert to find out what your options are and get a written pre-approval for additional security and negotiating power.
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Mike Cormack
Aussie Home Loans Joondalup
Wednesday, October 28, 2009
Is Joondalup One of Australia's Hottest Suburbs?
Wednesday, October 21, 2009
How to Find Your Ideal Investment Property
It’s a little easier to be rational about buying an investment property than buying a home. Since you don’t plan to live in it, you can inspect places with a more business-like eye
The Location
If you’re looking for a place with potential for capital growth, the experts reckon you should aim for place close to the CBD, because scarcity and demand will ultimately push the prices up.
If you’re looking for a good rental return and a steady cash flow consider buying in the suburbs or regional centres. Prices in these areas are cheaper so you’ll get a better rental yield.
Whatever the investment strategy you follow, there are some general things to keep in mind when deciding where to buy:
- Try to avoid places on busy roads or directly under flight paths.
- Waterside suburbs appeal to both renters and future buyers and they tend to at least hold their value.
- You don’t have to buy somewhere close to where you live.
Unsurprisingly, making a successful investment in property means buying the right place, at the right price, at the right time. So when you’ve narrowed down the locations you’re interested in, research the state of the property market in those areas. Keep an eye on vacancy rates, sales prices and rental rates. Look at the interest in the area, the current population growth and the projected population growth.
There are lots of websites out there to help you keep up to date with property market statistics. Send me an email and I will gladly add you to our regular property market update.
The Type of Property
Residential? Commercial? Or even a holiday rental? There are many of types of property to consider, but most Australians opt to invest in residential property because that’s the type they know best.
If you decide to go residential you’ll need to decide between a unit or house.
The plus points with a unit include:
- They tend to be cheaper and therefore provide a higher yield.
- The upkeep is managed by a strata company and if things go wrong the cost is split between all the strata owners.
- If you do decide to purchase a unit make sure you check the strata fees and council rates when doing the sums.
If you invest in a house:
- The extra land value can provide a greater chance for capital growth.
- There is good chance of finding a tenant as there are lots of families interested in having some extra room for the kids.
If you do decide to buy a house, be aware it can be a pain to maintain.
The Features Tenants Look For
When looking at a property, put yourself in the shoes of your potential tenants. Think about what sort of people the place will appeal to most. The sorts of things a family will look for will be quite different to what a professional couple will be interested in.
For example, a family is likely to be interested in things like the property’s proximity to schools and the quality of its kitchen, while a professional couple might want to know about nearby cafes and the distance to a convenience store.
Some features will appeal across the board. Look out for places with balconies, internal laundries and parking.
To find out what is popular in the area you are looking at, talk to local rental agents and ask them about the types of properties in demand.
Past History
Before you enter into negotiations for any place, find out if it was rented in the past: how much it was rented for, if there were any vacancy periods, how long it was vacant for, and why.
Monday, October 19, 2009
Get a Return On Your Investment
Historically, property has always increased in value. While there may be dips and plateaus, if you’re in it for the long-term, property is generally considered a pretty safe option. Not only do you have the potential capital growth to look forward to, you can also get a steady stream of rental income from the moment you rent the place out.
The thing is, strong capital growth doesn’t often come hand in hand with high rental returns, and vice versa. That’s because the more expensive the property the less the return tends to be. The properties most likely to have strong capital growth are in sought after, but pricey, inner city and beachside areas. While properties with a higher rental return are generally found in the cheaper regional and suburban areas.
For example: a 2 bedroom inner city unit might cost $650,000 to buy, but attract a rent of around $550 per week - a return of about 4% a year. While a 2 bedroom unit in the suburbs might cost only $300,000 but will get tenants paying $400 per week - a yearly return of around 6.5%.
So you should decide on your investment strategy before you even start searching for a property.
A CAPITAL GROWTH STRATEGY
Capital growth can give you the big wins in the long term. Some property investors have doubled their money after only a few years of ownership.
At the same time other investors have over-extended themselves and been forced to sell at a loss. Nothing is a sure thing.
Do the sums carefully. If you have high loan repayments you may see little return or even a loss for a few years. For some investors this is not a problem because they count on:
- The short term losses being greatly exceeded by the long term gains.
- the tax relief that comes with negative gearing.
Negative gearing is when the annual cost of your investment is more than your return. The Government offers you some tax breaks when this happens. To find out more go to tTax and your investment property.
A RENTAL INCOME STRATEGY
Opting for a strong steady stream of rental income doesn’t mean forgoing capital gains altogether – it just means your profit when you sell might not be as great as it might be for a different type of property.
A rental income strategy can work well if you don’t have to borrow heavily and keep your repayments low. It’s sometimes called positive gearing - so unlike negative gearing you won’t “lose” each week after paying all the outgoings.
Again you need to do the sums when deciding on your property and the price you’ll pay for it. The experts talk about the property’s “yield” as a measure of its return. Very simply it’s the percentage of the annual rent a property generates calculated against its purchase price.
To best work-out your actual return you need to calculate the money in your bank account after all costs and taxes are sorted.
THE COSTS
When deciding your investment strategy and what you can afford to spend, you should also consider the potential costs of ownership:
- Interest repayments - if you get a variable loan, factor in higher repayments if rates go up.
- Council rates and strata fees – the agent will tell you what these are per quarter but if you’re buying an apartment get a strata search so you’ll know if there are any big special levies in the pipeline.
- Repairs – if it’s a house you’ll be up for all the building repairs, but even in a strata block you’ll be responsible for repairs to fixtures and fittings and any whitegoods and appliances you include with the flat.
- Management fees – if you have the time and the inclination you can manage the property yourself, but if you get a managing agent count on paying around 5% of the rent.
- Insurance costs – if you purchase a house you’ll have to pay building insurance. It’s also a good idea to get landlords insurance which covers:
- Any damage done by a tenant.
- Your legal liability if a tenant injures them-self.
- Lost rental income if your tenant moves out without paying.
When doing the sums, factor in rent-free/tenant-free periods. The experts say at least 4 weeks a year is a good rule of thumb.
CONSIDER THE RISK
Like with any investment there is no guarantee that you will get a return. Property prices can drop and, good tenants can be hard to find. Do as much research as you can before deciding if property is the best place for your savings.
Tuesday, October 13, 2009
Top 5 Reasons Borrowers Are Rejected
MyRate.com.au Managing Director Kevin Sherman explains. “Lending criteria have become a lot stricter in the past 12 months and people can benefit from understanding how these changes will affect their chances of securing a home loan. The recent turmoil brought about by the GFC coupled with deflating property prices and an increasing unemployment rate has seen all lenders change their risk appetite. As such, it is now a lot tougher to qualify for a home loan.
Top 5 reasons based on the MyRate.com.au analysis:
1. The borrower cannot demonstrate they have saved a genuine 5% deposit“These days I’d go so far as to say it’s impossible to get a loan without at least a 5% deposit” says Sherman. “This is a significant change, as a few years ago consumers didn’t even need a deposit for some loans.”
2. The borrower has servicing issues - for example, they do not have a steady income or are still on work probation“This is a concerning factor for borrowers with a new job,” said Sherman. “The problem lies in that many employers are now extending probationary work periods from the usual three months to six months. Their reasoning: there is so much quality talent looking for jobs that employers are ‘playing it safe’ just in case an employee doesn’t work out or in case the business needs to lay staff off. This means that people are having to wait longer to secure a loan.”
3. The borrower cannot supply enough funds to cover at least a 10% deposit for new purchases, or 15% of the property value for refinances“Deflating property prices in the current climate and a softer estimate for future growth means that lenders now want their borrowers to put up more of the money themselves in order to reduce the risk to the lender. It isn’t uncommon for lenders to now demand a 15% deposit in some situations,” explains Sherman.
4. There are issues with the property that they wish to buySherman explains “There are certain types of properties that lenders might now consider ‘unsuitable’. This could be because the apartment you want to buy is in a giant complex of similar flats which makes the lender concerned it will be hard to sell should they need to. A property may be a little run down or be valued at a lower price than expected, which may affect the loan amount the lender will agree to.”
5. There are issues with the borrower credit file“It could be that you have been shopping around for finance and, as such, your credit file is showing too much activity - something which is viewed by lenders as a negative as they may think you were denied finance by various providers. It could be an unpaid Telco bill. Basically, anything that may raise suspicion will be closely scrutinised and assessed for risk.”
“The bottom line is that lending policies have tightened significantly. Banks and lenders are more cautious than ever before, with most looking for a better quality borrower. The best thing you can do for yourself is to be organised and over-prepared - you’ll come across as a great candidate if you can demonstrate your ability to repay to the best of your ability.”
