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Getting A Return

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 themself.
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. EAVB_TUTJJUVVMV

Consider the Risks
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.

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0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup
Artice courtesy of www.aussie.com.au. More articles also at www.facebook.com/aussiejoondalup

What Do You Need To Know About The First Home Owners Grant Changes?

Until 1 January 2010 the cost of your first home did not effect your eligibility for the First Home Buyer Grant. The state government has now introduced a maximum price cap. The cap limits the total value of properties (i.e. total value of home and land) to $750,000.00 or less, or if the home is located north of the 26th parallel to $1,000,000 or less.

When EXACTLY Does (Did) it Start?

The First Home Owner Grant cap applies to all eligible transactions in W.A. that are made on or after 1 January 2010. That date is determined as follows:
* for Established, New Home and Off the Plan – the date when the contract is made; and
* for Contract to Build – the date when the building contract is made; and
* for Owner Builder – the date when laying the foundations for the home begins.

How Do They Calculate a Properties Value?

The total value of a transaction can be determined by:
* Established, New Home or Off the Plan - the higher out of the contract price, or the unencumbered value.
* Contract to Build – the total of the contract to build, and the unencumbered value of the land.
* Owner Builder – the unencumbered total value of the home and land, at the date the transaction is completed

PS Remember this information is a guide only and you should contact a First Home Buyer expert to discuss your specific details. The Aussie Mortgage Advisers in Joondalup are trained in this area. Call them for more information during normal business hours on (08) 9300 0686

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup

Why Invest In Property?

This is the first post in a series of 6 all about buying an investment property. Topics covered will be:

• Why Invest In Property?
• The Return On Your Investment
• Choosing an Investment Property
• Choosing an Investment Loan
• Tax and Your Investment
• Managing Your Asset

Check back soon for part 2. I hope you will find them informative.

Why invest in property? The big difference between property and any other type of investment is that you can actually touch it. It’s bricks and mortar, not just numbers on a screen.

It’s also considered one of the more solid, less volatile forms of investment. Investors tend to like property for its:

• Potential capital growth (increase in value).
• Ongoing rental return.
• Tax benefits.

You don't need a big salary to get started. Lenders consider the potential rental income you’ll get from the property when calculating how much you can borrow. So property is a viable investment option for first time property buyers as well as existing property owners.

If you already own your own home, and have a reasonable amount of equity in it, you mightn’t need to raise any cash to start investing. Many lenders will let you use that equity as a deposit for the investment property.

But if you don’t already own a property don’t be put off. If you have a deposit saved, an investment might be a good way to get into the property market. While you won’t get all the grants and concessions that come with buying a home, you don’t have to wait till you can afford somewhere that suits your needs. You can buy something that might make you some money instead.

If you enjoyed this post or found it useful, please consider posting a comment or 'Sharing' it using the button on the top left of the page.
0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Home Loans Joondalup