Why WA’s Market Must Inevitably Rise

Terry Ryder is the director of hotspotting.com.au and has just released the latest edition of Western Australia Hotspots Report. He had these words to say:
"Key property markets in Western Australia are rising strongly. You’d never know it, because media keeps telling us the Perth market is falling.

But there’s more to WA than Perth. Key regional centres like Geraldton, Port Hedland, Karratha and Albany have strong markets.

The Perth market must inevitably follow suit. It hasn’t happened yet because most of the spending that constitutes the much-touted resources boom is still to come.

The $43 billion Gorgon gas project is Australia’s biggest resources project but the major work hasn’t started. BHP Billiton, Rio Tinto, Woodside Petroleum and others are planning huge expansions, but the big money hasn’t yet been spent.

When miners start digging holes and raising structures, businesses (mostly based in Perth) will expand, with major impacts for commercial, industrial and residential property in the state capital."

Why Smart Shoppers are Using Mortgage Brokers

Most people understand that a mortgage broker can help take the work and potential headache out of comparing literally thousands of loans from dozens of different lenders for you. Most brokers do not charge a fee for their service and have obtain a variety of industry qualifications. All brokers at Aussie Joondalup have obtained Certificate IV in Finance, Mortgage Broking and are a member of Mortgage Finance Association of Australia, the peak governing body of professional mortgage brokers in Australia. Currently, all Aussie Joondalup brokers have a minimum of 6 years individual experience writing new home loans.

Check out what local online news source WAToday.com.au had to say about broker in a recent informative article: WAToday

7 First Home Buyer Mistakes to Avoid

Higher levels of savings, increasing rents, stable interest rates, a softer housing market and the banks relaxing their lending criteria have all combined to create a unique opportunity for first home buyers looking to get on the property ladder. There are some common mistakes that first home buyers make, however. Make sure you don’t fall into these traps:

1. Changing jobs or making a major purchase at the same time as applying for finance.
2. Not getting your finance pre-approved, and leaving everything ‘too late’ when the ‘right’ property is found.
3. Borrowing right up to the amount the lender is prepared to loan you, and then being financially over-stretched.
4. Letting emotions take over in the negotiation process, and paying too much for the property—or missing an opportunity to negotiate more favourable purchase conditions.
5. Not doing your diligence and checking out things such as council zoning, building approvals and restrictive covenants.
6. Buying a ‘do-up’ and then running out of money. Renovation is not a cast-iron route to riches, and if it turns out to cost more than you bargained for, you could be living in squalid circumstances for too long.
7. Forgetting to sort out property insurance well before you move in, and forgetting to tell the utility companies!

Aussie Joondalup broker Mike Cormack has been a first home buyer himself and has 6 years home lending experience to draw on. He regularly successfully guides local first home buyers to their first home. Email Mike for a free copy of his Aussie First Home Buyer Guide and see how he can help you too.

What You Need to Know About Tax & Your Investment Property

When it comes to property investments and tax there are 3 main things to be aware of:

* Negative gearing.
* Tax deductions.
* capital gains tax.

Negative Gearing

Negative gearing is when the annual cost of your investment is more than your return. Basically, when the cost of maintaining your property and paying the interest on your loan is more than the rental income you get from it, you are negatively geared.

When this happens the government allows you to deduct the costs of your property from your gross income. So say your income is $60,000 a year but your property costs you $15,000 a year, you’ll only need to pay income tax on $45,000.

This way you’ll pay less tax, but don’t be mistaken, it is still a loss -just a smaller one – that hopefully will be more than made up for by the property’s increasing value. You probably won’t see a return on your investment until you sell the property, and only if it’s for a much better price than you originally bought it for.

Tax Deductions

Whether you are negatively geared, or getting a positive income stream from your property, you can claim expenses relating to your rental property for the period your property was available for rent.

All the following expenses can be claimed:

* Advertising for tenants, agents fees and commission.
* Interest payments and loan fees.
* Council rates, land tax and strata fees.
* Depreciation of items such as stoves, fridges and furniture.
* Repairs, maintenance, pest control and gardening.
* Building and landlords insurance.
* Stationery, phone costs and any travel to inspect the property.

The above is not a full list of what you can claim. Get proper advice from a tax expert before putting in your return.

Capital Gains Tax

What the Government gives with one hand, it takes with the other. Capital gains tax is a tax on the profit you’ve made on the property. So it’s based on the difference between what you sell it for and what it cost you (the purchase price plus anything you have spent on capital improvements or renovations).

Definitely get advice on what you might be up for when considering selling your investment property.

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Mike Cormack
Aussie Home Loans Joondalup

Christmas Present Or January Sales? When Is The Best Time To Buy Property?

There are just under eight weeks to go until Christmas – even less time until the frivolity of the holiday season is upon us. It’s a lively time of hectic personal, social and business commitments, followed by a period of relative down-time. So what if you’re in the market for a new home – should you buy before Christmas or put it off until next year?

Whether it’s gift-giving, taking a holiday or entertainment expenses, the festive period can put a strain on the budget. According to Credit and Charge Card Statistics reported monthly by the Reserve Bank, Australians owe more than $44.9 billion in credit card debt, and our credit card purchases in December are at least 15 per cent higher than the average monthly purchases throughout the rest of the year. With many economists predicting more than one interest rate rise in the next few months, house-hunters need to plan their finances very carefully.

But while it’s an expensive time of year, there’s also opportunity to snap up a pre-Christmas property bargain.

“It is a really good time for purchasers to be picking up a good buy, pre-Christmas,” says Georgi Coward, Real Estate Agent with Cunninghams Property. Coward explains that in December, homes on the market are those leftover from spring, which may not have been priced appropriately. “Vendors realise at this stage that it hasn’t sold and that they’ll now be waiting an extra, longer time.”

“A lot of buyers disappear as well, so there are just the really keen ones that are out there,” says Coward. “They’re often the ones that will pick up a bargain, as vendors are more negotiable, and there’s a little bit more desperation to sell, move on and enjoy Christmas.”

As for property values, there are indications that prices will only go up from here. “Overall we’re finding that buyers are very confident about the direction of the market and most agree that 2010 will see between five to ten per cent price growth across the board,” says John McGrath, CEO of McGrath Estate Agents. “Serious buyers have been looking to get set in the market for the last three months.”

McGrath says that interest rate rises will have an impact on anticipated price growth “only if we see a two per cent hike in the next nine months, which is unlikely.” He says, “Most buyers have factored in another one per cent in their thinking and are happy to buy with that in mind.”

But buying next year has its benefits too. “January can be a good time to be buying with leftover stock that hasn’t sold prior to Christmas,” says Coward. Holding off also gives you a little more financial breathing space over the holiday season, and the chance to pounce on the fresh New Year stock as it comes onto the market – while other buyers are taking holidays.

“There’s an opportunity that you can jump on it before anybody else, and before it hits the papers,” says Coward. “But you may end up paying a premium to take it off the market.”

If your home is, or will be on the market before you buy, these considerations apply to you as a vendor as well, not to mention the need to time both your transactions optimally. So, whether ‘tis the season for a sale or not, ultimately depends on your circumstances and needs. And your Christmas wish list.

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Mike Cormack
Aussie Home Loans Joondalup

Is Joondalup One of Australia's Hottest Suburbs?

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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Aussie Home Loans Joondalup

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.

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Aussie Home Loans Joondalup

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.

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0403 144 822

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Mike Cormack

Aussie Home Loans Joondalup

Top 5 Reasons Borrowers Are Rejected

Online lender MyRate.com.au has undertaken qualitative research to discover the top five reasons would-be borrowers have their applications rejected. The study was brought about in order to better educate those considering a home loan.

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.”

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

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Mike Cormack

Aussie Home Loans Joondalup