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.

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
Artice courtesy of www.aussie.com.au. More articles also at www.facebook.com/aussiejoondalup

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

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.

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

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.

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