What matters when buying your first home 

What matters when buying your first home 

First home buyers have significantly reprioritised what matters most when searching for their ideal home, according to the Westpac’s Home Ownership Report.  The research, commissioned by Westpac surveyed over 1,000 Australian home owners and first home buyers, and features trend data from the past two years.  The latest report demonstrates that first home buyers are less focused on buying a home in an area that is trendy or close to work, with both significantly decreasing in the ranking of “essential features” by 83 percent and 48 percent respectively.  A quiet neighbourhood, access to public transport, and safety are features that have also become less important during the decision-making process, with each decreasing by 37 percent, 21 percent and 9 percent respectively.  Andy Wright, Head of Home Ownership for Westpac Group, said in the face of housing affordability challenges and rising household costs, the research suggests first home buyers are becoming increasingly flexible and willing to shift their priorities in order to achieve their ultimate goal.  “These attitudinal shifts among first-home buyers towards home ownership suggest we may see more looking to buy in areas that they hadn’t considered, with many previously thought ‘essential’ features now just ‘nice-to-have’,” Wright said.  “In fact, the market saw home loans to first home buyers recently rise to a four year high, which suggests we may be already seeing the positive results of these shifts, combined with government incentives in New South Wales and Victoria.”  First home buyers are turning their attention to the inside of a home instead, as modern bathrooms and kitchens become more essential, increasing in priority by 25% and 10% respectively.  Nearly...
Things you don’t need to make a property investment

Things you don’t need to make a property investment

There is no shortage of commentary within the market on what property investors need to start their investment property portfolio. However, what are the things you don’t need to get started now?    First up, a credit card  Don’t believe the hype, credit cards don’t help your credit rating. In fact they are more than likely going to inhibit your ability to borrow rather than help.  Always focus on getting your mortgage approval before you attain or up your limit on your credit card to maximise your borrowing capacity.  ‘So, if you have a $5,000 limit, for example, this will reduce your borrowing capacity when being assessed by the banks. Therefore, where possible, reduce your credit card limits or cancel unused credit cards.’    You don’t need experience  Let’s look at the facts, every investor started somewhere. Just because you haven’t bought a property before doesn’t mean that should stop you from starting now. The only way to get the experience is by doing it.  It can be a daunting step, however, surrounding yourself early with industry experts including in investment property focused mortgage broker, accountant and buyer’s agent can help you build up the knowledge and confidence to buy the correct property the first time around.    Be an expert  You don’t need to know everything. Use your team for what they are good for. Years of experience and expertise. This can fast track your outcomes rather than making a lifelong mistake when buying your first property.  Build a team of industry experts including in investment property focused mortgage broker, accountant and buyer’s agent to ensure that your first purchase...
Why property investors must pay attention to ‘mini CBDs’ 

Why property investors must pay attention to ‘mini CBDs’ 

Contrary to the belief that the best areas to purchase properties in are capital cities and central business districts, many investors are now looking into smaller CBDs as the next hotspot for property investment.   Sydney and Melbourne are considered gateways of Australia’s expanding population, but migrants are not the biggest factor to consider when scouting for a location.   Here The Demographics Group’s Bernard Salt, offers some opinion on smaller CBD’s. Although migrants are “fuel into the greater furnace”, there is a more important question to be addressed: “How will this area look like with five million people? How about with eight million and so on?”   He explained: “At five million, you’ve got Sydney CBD and the inner suburbs … There’s been growth around Chatswood at a business hub, around Ryde and Epping … [and] Parramatta.”   “By 2050 there will be hubs, I think, particularly around Parramatta … and Blacktown [and] Badgerys Creek … Genuine satellite cities. “ “Sydney at eight million people cannot continue to have people living on the edge, getting on the train in the morning, and commuting into the city centre. What will happen is that the city centre jobs will start to be replicated in stronger, suburban, regional centres,” the social commentator added.  Bernard gets into details about how people create “mini CBDs” within a metropolitan area, and what this could mean for property investors all over the country:    How will you compare Sydney to other capital cities in the world?  Bernard: Los Angeles doesn’t really have a single CBD the way [that] Sydney does. There’s something in the CBD, but there’s also at Anaheim, also in Orange County, also at Irvine, also in the San Fernando Valley.  When you get to cities that...
Interstate investment: Don’t just look at the price.

Interstate investment: Don’t just look at the price.

When making the jump to investing in an interstate property, there’s more than just a price point that needs to be considered. Property investors who only look to their immediate cities could be short-sighted and should consider opportunities further afield. However, in doing so, investors need to focus on more than just compelling price points. There are different property cycles across the Australian economy all the time so investors considering an interstate purchase need to be aware of what is occurring in their target areas and can do so by seeking out the experts in those locations that have proven track records. The second step is assessing the vacancy rates. Low vacancy rates is always a good indication of how an area is performing, and there are quite easy ways for investors to access this information online. Investors should also look to where there’s good infrastructure going in, where the state has made a good investment in a particular area that should help to develop that location on the back of the infrastructure going in. Investors need to watch out for high vacancy rates as another guide. Are there high levels of over supply? This means that investors should be cautious. It’s really about doing your investigations, finding out who the experts are in a particular area and going to consult with them, look at their testimonials around their success and choosing them on that basis. It’s very hard to try to be an expert in a different area yourself and we should be very careful about buying in another state just because the price point is compelling alone....
What to Look For in Your Landlord Insurance Policy

What to Look For in Your Landlord Insurance Policy

Landlord insurance is a vital part of protecting one of your most valuable assets:  your investment property. A landlord insurance policy can protect your building, fixtures and contents, as well as provide additional options for tenant default and theft.     Does the policy cover building, contents, or both?  When choosing your landlord policy, you will usually be able to select whether you would like to cover your building, contents, or both. If you are opting for building landlord insurance only, check that your policy includes fixtures such as air-conditioners, dishwashers, and fans. Otherwise any significant damage to your property will leave you substantially out of pocket. If your property is furnished, you’ll want to consider contents insurance. Contents insurance not only covers loose items, but will usually also protect movable swimming pools or spas, carpets, curtains and removable light fittings.    Are you covered against the most common natural events?  Natural events can devastate your property in a matter of minutes, so make sure you’re properly protected. As a minimum, check that your policy covers fire, storm, and impact damage. If you’re in an area where flooding is possible, you’ll also want to look into flood cover. Most policies will allow you to add this as an additional extra, subject to certain eligibility criteria.    Are you protected against legal liability?  Most people don’t consider legal liability when choosing a landlord insurance policy, but it is one of the most expensive costs a property owner can face. Legal liability cover will protect you against claims arising from injury to another person or their property, caused by or within your investment property....
A checklist for off-the-plan success 

A checklist for off-the-plan success 

Every area and property is different, there are certain things to look out for across the board. Here are some key things to check when purchasing property:  Uniqueness  Look at the nearby area of any proposed investment property and do some research on how unique the property is for the area. This will inform whether there is a desire within the local community for a rental property such as this, and therefore, whether it will be easy to find tenants.   Infrastructure  Always look at infrastructure or impending infrastructure of the development if you’re buying off-the-plan.  Some developments have their own infrastructure, so the proximity of a resident to places like supermarkets, shopping malls, cinemas and so on is not an issue – residents can park their car and get groceries on the way to their apartment.  Then there’s external infrastructure to consider, such as proximity to the CBD, hospitals, schools and transport.   Would I live here?  Consider the demographic of the people who would be looking to live in the development. Each development is different. Different apartments suit different lifestyles and budgets.    What will the area be like in five to 10 years?  Property investment normally requires a long-term strategy, so look at the last five to 10 years of population growth and property price fluctuations. No one has a crystal ball for property investment, but you can look at other factors in the area and make an educated guess.  If the local community has shown support for the development because it will bring much needed amenity to the area, and a huge amount of jobs you are on a winner. ...
Set a Framework with your Property Manager 

Set a Framework with your Property Manager 

As much as property managers want to give the best service to their clients, investors must also be responsible enough to reflect on the kind of relationship they have established with their financial team—how do they become a better client to attract the best professionals?  Being good property managers takes time and effort so having a client who is consistently proactive in pursuit of his own success makes work considerably easier and even fun.  First and foremost, investors must keep in mind that property managers are professionals—they know their way around the market because they quite literally spend every working hour studying it. It is, therefore, important for them to keep a clear set of tasks to accomplish every day in order to serve all different clients with different needs without compromising the quality of their work.  They know the market, they usually have a clear schedule. They know exactly what they need to do. They’ve got to set the task list when it comes to leasing a property, to managing a property, and how they address each of the items they’ve got to do.  The best thing for a property investor to do, is to have the same mindset. Being able to understand exactly what the investor wants saves both the property manager and their client from misunderstandings as well as wasted time and effort.  They might have an investment strategy, they might know when they plan on doing these renovations, what their targets are, exactly why they bought the property, what sort of communication they need, and what sort of schedule they want to be on.  While...
Why understanding your cash-flow is important 

Why understanding your cash-flow is important 

Cash-flow is not just about the rent that you’re earning from your portfolio.   Successful property investment requires an understanding of your individual cash-flow position needs as well as your ability to manage your cash-flow over the decades.  Sometimes people tend to start looking for properties that will represent what their understanding of cash-flow is – which is often wrong to start off with.  If you take someone who is on a really good income, a 5 per cent yielding property might be good enough for them once they include all of their tax deductions.  However, if you consider a young couple who are just starting out and don’t earn a lot, and therefore do not have a lot of disposable income, a 5 per cent yield may not be enough to maintain their lifestyle.    It’s an individual equation  Your own unique situation or financial footprint is going to dictate where you should begin and where you’re going with your cash-flow requirements.  As life unfolds there are going to be times when your cash-flow is going to be more important to you, which is why pre-planning is vital.  Managing your cash-flow throughout your life – including when children arrive, as an example – is the name of the game, especially when you’re building up an asset base.  Take our interest rate at the moment, which is historically low but won’t stay that way.  Too many property owners and investors aren’t thinking about that overly much, which will ultimately impact their cash-flow, because they’re too busy enjoying the strong capital growth. This is a critical mistake.    Cash–flow management  When it...
How to increase your rental yield

How to increase your rental yield

Market places change. These tactics can help investors increase their rental yield, regardless of price and market conditions.    Cosmetic renovations  Humans can be superficial. So even a basic cosmetic facelift to your investment property may be enough to command extra dollars in rent each week.  This could be a fresh coat of paint, more modern light fixtures, or updated blinds and curtains to maximise light. The rule is to keep it simple, not blow the budget, and ensure all changes you make are mostly timeless.    More substantial renovations  No amount of fresh paint will help if the kitchen and bathrooms look like something out of the dark ages.   Substantial renovations, like a new kitchen and bathroom, or new flooring, require capital and time, and of course a loss of rent, but can dramatically increase your yield. Apart from the immediate increase in rent, it will also reduce how much you will spend on repairs and maintenance in the long term, as you will have new appliances and fixtures.  Assess similar local properties to understand what the local standards are to avoid overcapitalising and to assist with budgeting.    Add furnishings  Furnishing a property can instantly lift its rent, so long as this is appropriate for your location.  As an example, furnished properties may be ideal near universities where there is high demand for “turnkey solutions” by students. In this case, styling should reflect a younger demographic, and cater for potential wear and tear from socialising.  Travelling business people may also require furnished properties near airports or city centres, and may prefer not to spend through the nose on more expensive...
Tenant problems to be aware of

Tenant problems to be aware of

When you first purchase an investment property, it’s easy to think of rent as a passive income stream that simply takes care of itself. But tenants can cause you problems….  Most tenants comply with their obligations, and are respectful of their landlord’s property.  If you’re planning to be a landlord long term, however, there are a couple of tenant problems you’re almost certain to face. Fortunately, landlord insurance could offer a mix of options that may be able to cover you against some or all these risks, so if the day comes you won’t be left empty handed!  Tenants leave without telling you  Contractually, every tenant is required to give notice before they end their lease at a property.  Sometimes, however tenants leave with short – or no – notice for a variety of reasons.   When tenants leave in a hurry, it’s sometimes difficult to retrieve the rent you can lose while preparing the property for occupation and finding new tenants.   Landlord insurance policies may cover you for up to six weeks while you search for a replacement tenant, and could help to reduce your out of pocket losses.  Tenants stop paying their rent  This is the big one. Failure by tenants to pay their rent is more common than you think. In fact, claims for rent make up more than 40% of all applications to Australian tenancy tribunals.   Sometimes by the time you’re able to replace your non-paying tenants with new tenants, you may have lost more rent than is covered by the bond.   Landlord rent default insurance is generally available as an optional cover that can protect you from loss of rent for a period...
Learn from the Experts

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