News and Blog

News and Blog

Investing in Property

May 9th, 2018 • Industry NewsInvestments

Step 1: Talk to us about your borrowing power

The first step involves a friendly chat with us about the finance set-up. We’ll run through your personal financial circumstances and help you determine your borrowing power - which is the amount a lender may be willing to lend you. Your borrowing power may be very different for an investment property than for a home to live in yourself.

Like all property purchases, you’ll need a deposit. If you already own your home and it has appreciated in value, or you’ve paid down your mortgage somewhat, you may be able to refinance to access equity to fund it. We can explain how this works and the kind of loan that will best suit your situation. We can also organise pre-approval so that you can set a purchasing budget and be confident a lender will come through with the finance when the time comes to start investing.

Step 2: Formulate an investment strategy

Ask yourself what your ultimate objective is – do you want to build a big investment portfolio of 10 properties or more and make a business out of it? Or are you more interested in concentrating on paying off your own home, perhaps using an investment or two on the side to generate some money to do it?

We recommend seeking advice from your financial planner or professional tax advisor when formulating your investment strategy. Maximising tax advantages is a big part of property investing and knowing what they might be in your personal situation is key. Ask us for a referral if you don’t already have a professional on board.

Step 3: Set your budget

There are many costs to factor into your budget when buying an investment property. The financial side of a successful property investment is a balance between costs, income, tax deductions and how they affect your overall cash-flow. The costs to factor in may include the following:
 
  • Initial costs

  • Deposit
  • Loan establishment fees
  • Lenders’ mortgage insurance (if you have less than 20% deposit)
  • Stamp duty (calculators are available here)
  • Conveyancing and legal fees
  • Building and pest inspection reports
  • Quantity Surveying fees – to create your Depreciation Schedule for the fixtures in the property, so you can maximise your tax deductions (after purchase).

  • Ongoing costs

  • Rates/government taxes
  • Insurance
  • Mortgage repayments
  • Body corporate fees
  • Utilities not paid by the tenant
  • Property management fees
  • Repairs and maintenance costs.

Step 4: Do your research

The key to buying the right investment property is to spend plenty of time researching. Property investors usually focus on two key financial returns – capital growth potential (which is the growth in the property’s value) and rental yield (the income the property will generate from the tenants).

These factors are driven by supply and demand, so try to find a property that will be in high demand by tenants and future potential buyers. Ask us for assistance with the right property market data to inform your property searches.

Once you’re set on a property, be sure to organise building and pest inspections. You’ll want to know that the property is structurally sound and free of unwanted guests before making an offer or going to auction.

Step 5: Finalise your finance

The final step involves us helping you secure an investment loan that suits your financial circumstances and goals. Ask us to get you pre-approval on a loan for the specific property you want to buy before you make an offer or buy it auction, so you can have a realistic ceiling price to work with during the negotiations.

This step is the most important one of all if you’re buying at auction – you will be required to put your deposit down on the spot and it is not refundable if the lender does not agree the property is worth the price you paid and won’t lend the amount you need to complete the purchase. If you are buying under offer, we recommend you include a ‘subject to finance’ clause in the sales contract, to cover this contingency.

If you’re thinking about joining the thousands of Australians building wealth for the future through property investment, don’t wait to give us a call. Our mortgage brokers are here to give you expert guidance about investment loans and structuring your finance. Talk to us today!

Can a Boarder Help You Pay Your Mortgage?

May 4th, 2018 • Industry News

Taking on a boarder could be a viable way to help you pay your mortgage, but it won’t all be beer and skittles! If you’re going to take in a boarder, there are some very important implications to consider first, as we explain in this article.

The pros of having a boarder
  • Additional income
  • You can offset your household costs
  • Potential tax deductions for property expenses
  • The social factor.


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The cons of having a boarder
  • Loss of privacy
  • Extra responsibilities as a live-in landlord
  • The income may push you into a higher tax bracket
  • You may be subject to Capital Gains Tax (CGT) when you sell
  • Many lenders don’t take rent from roommates into account when assessing whether you can afford a home loan.

Legalities to consider

The money received from your boarder will generally be considered accessible income by the Australian Taxation Office (ATO), and you must declare it on your tax return. You may be able to claim deductions for expenses associated with renting out part of your home, such as interest on your mortgage. However, if you rent to a relative at a discounted or less than market rate, it can affect what you can claim. In some instances, payments from a family member for board or lodging may be considered a domestic arrangement and not rental income, so you may not be able to claim tax deductions.

You won’t have to pay Goods and Services Tax (GST) on the rent you charge, nor will you be able to claim GST credits. However, when it comes time to sell, you may not be entitled to the full main residence exemption from Capital Gains Tax (CGT) - generally you don’t pay this when you sell the home you live in. You can find more details via the ATO website, however, it’s wise to speak to your accountant about the financial implications before proceeding.

Precautions

It’s also important to familiarise yourself with your rights and responsibilities, and those of your boarder. Contact your local tenancy authority for advice. You’ll also need to follow the rules about lodging the bond with the residential tenancy authority in your state or territory.

Having a solid contract or tenancy agreement in place will help protect you, should things go wrong. The agreement should stipulate exactly what’s included (e.g. furniture and parking), when and how rent is due, details about notice required and room inspections, and bill arrangements. Also, consider your insurance needs. We partner with some of Australia’s leading insurance providers, so please ask us for help.

When interviewing candidates, be sure to ask plenty of questions and request references from previous landlords (even if it’s someone you know). Being clear from the start will help you avoid issues down the track. Talk openly about your expectations about things such as:
  • privacy
  • paying rent
  • noise
  • cleanliness
  • overnight guests
  • Lastly, before they move in, fill out a condition report and take photographic evidence.

Becoming a live-in landlord can help you pay off your mortgage and cover living expenses, whilst also allowing you to claim tax deductions in some instances. However, there are important implications to consider, which is why it’s so important to consult your accountant or financial planner first. If you’d like to know more about your finance options for purchasing your home, please speak to us. We can help you find a home loan that suits your specific financial needs and goals – and perhaps make it affordable without Cousin Jimmy’s contributions!

Rates On Hold

May 1st, 2018 • Industry News

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Finance Broker or Bank?

Apr 30th, 2018

Finance Broker or Bank?

Stamp Duty Explained

Apr 24th, 2018 • Industry NewsHome Loans

Stamp Duty Explained

Auction by Phone

Apr 10th, 2018 • Industry NewsHome Loans

Why bid at an auction by telephone?

There are many reasons why you may prefer to bid at an auction by phone, rather than attending in person. These may include:

Geography: You may want to bid on a property that is rural or located interstate. Or you may want to bid at several auctions being held on the same day and can’t attend them all in person. If that’s the case, you may be better off organising someone to be there for you and work with them over the phone.

Nerves or inexperience with bidding: A lot of people feel nervous about bidding for themselves – it’s a normal reaction. It’s also normal to feel intimidated by other bidders, particularly if you’ve come face-to-face with some competitive types! Bidding over the phone can help you remain objective by keeping the excitement of the situation at arm’s length.

Avoid overspending: It’s easy to get carried away by the excitement at an auction and bid above your budget. If it’s a property you really want, it’s hard to stop adding another thousand when the object of your desires is only a few meters away – that’s why they often hold auctions at the property’s front door! It’s easier to stay in control if you place your bids remotely, because you can give your bidder an absolute spending limit.

What are the pros and cons?

Auctions can be loud and stressful, and bidding by phone can take a lot of the anxiety out of the experience. When the auctioneer starts spruiking and the crowd gathers, you won’t be distracted as you try to sort the sticky-beaks from the serious bidders. You’re more likely to remain calm on the other end of the phone, and go about things in a business-like fashion.

By the same token, not being able to see the other bidders can be a disadvantage, as you won’t be able to read their body language and gauge the competition. That’s where communication with your stand-in is essential! You may even like to use Skype, FaceTime or a similar app, so that you can “see” the competition during the auction.

How do you go about organising it?

The first step is to check that phone bids are accepted by the auctioneer, agent and vendor. If they are, you’ll most likely have to register and fill out a form beforehand nominating a stand-in to bid on your behalf. Then it’s simply a matter of nominating someone to bid for you. You may also like to organise your solicitor to be available in the event that yours is the winning bid.

What happens if the property is passed in and you want to negotiate?

If the bids do not meet the seller’s reserve, the property may be passed in or withdrawn from auction. If you are the highest bidder, you’ll have first dibs on negotiating with the seller. Your agent or contact on the other end can do this for you whilst you’re still on the phone, or can pass over the phone to the auctioneer or seller so you can speak with them directly.

How do you pay the deposit and sign on the dotted line if you succeed? When you fill out the paperwork to nominate your stand-in, you can specify how you’ll pay the deposit on the day if successful (usually 10 per cent of the purchase price). You can authorise the agent or auctioneer to complete a signed blank check, provide a signed bank cheque for 10 per cent of your maximum bid, authorise the stand-in to pay the deposit on your behalf, or transfer the money into the agent’s trust account.

In terms of the sale contract, you can nominate the authorised bidder or auctioneer to sign on your behalf. Alternatively, you may like to be present and go along to sign once the phone bidding is over, or tee up your solicitor to represent you beforehand.

Bidding at auction by phone could be a less stressful way of securing your dream home or investment property. It can also be more convenient if you’re not close by. Remember, organising pre-approval on a loan before the auction is vital, so please get in touch. With any luck, you’ll hear those magical words on the big day – “sold to the bidder on the phone!”
 

ThisThis article provides general information and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or loan product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loan applications are subject to lenders’ terms and conditions, and eligibility criteria. Lender fees and charges will apply.


6 Ways to Increase your Home’s Selling Price

Apr 9th, 2018 • Industry NewsHome Loans

Curb Appeal

First impressions are everything. When it comes to renovating with resale in mind, you want your home to have that ‘wow’ factor as soon as buyers see it. Consider the view from the street – the front façade, fence, garden, windows, roof and driveway. Spruce them up and make them work together to add charm.

Kitchen

Renovating the kitchen is one of the most effective ways to add value to a property. Many buyers like the idea of having the kitchen done for them, so that they can just move in and enjoy it. If you have a larger budget, you might like to opt for a custom-made kitchen that’s made-to-order to suit the home. Alternatively, there are some great modular kitchens available at reasonable prices. New cabinetry, appliances, benchtops, and a striking splashback will do wonders for your home’s sale price.

Bathroom

Renovating bathrooms with modern fixtures and fittings can also drive up the value of a property. If your bathroom is passable but just needs some love, you could simply respray the tiles, fixtures and fittings, rather than redoing the whole lot. Another idea is to redo the tiling yourself, and update only the fixtures that need replacing, whether it’s the bathtub and vanity, or basins and shower screen. If you only have one bathroom, consider adding extra bathrooms to your property, as this can boost a property’s value.

Flooring

Installing new flooring can make a big difference to the appeal of your home, and therefore its value. There are plenty of great budget flooring options out there that look attractive. Vinyl planks and laminate flooring for example, are both popular, durable, budget-friendly products that you can install yourself. When choosing your flooring, remember your target audience. If your market is a family or property investor, wall-to-wall carpets may not be the best option. Remember the golden rule, minimal expenditure, maximum return.

Paint

It’s amazing what a fresh coat of paint can do to transform a property! A 1960’s home with retro mustard wallpaper can look instantly modernised and refreshed with a new lick of paint. Best of all, a paint job can be relatively inexpensive, particularly if you do the painting yourself. If you want to give your property a lift and appeal to the majority of buyers, be sure to go for a neutral colour scheme that won’t date quickly.

Additional bedrooms

If the space allows, adding more bedrooms to your property is another way to increase its value. While you may be up for a sizeable outlay in the tens of thousands, the financial rewards come sale time can also be big (in some cases, several hundreds of thousands). Remember, properties are typically valued based on land size and the number of bedrooms – the first, you can’t change, but the second you can. If you need help with finance for major structural renovations, speak to us about your options.

If you’re looking to renovate to boost your property’s value, remember - careful budgeting and planning is key. We’re here to help with that, as well as to help you work out the right option to finance your renovations. You may be able to refinance your home loan to access equity to complete the project. Alternatively, we can walk you through the other finance options available to you, depending on your financial circumstances and goals. Please get in touch and we’ll help you get the transformation under way!

This article provides general information and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or loan product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loan applications are subject to lenders’ terms and conditions, and eligibility criteria. Lender fees and charges will apply.


Property Investment

Apr 6th, 2018 • Industry NewsInvestments

Negative gearing

Put simply, negative gearing is when the costs of owning a property - like the interest repayments, rates and maintenance costs - exceed the income you receive. Say you earn $25,000 in rental income and your expenses add up to $35,000, the property would be negatively geared to the tune of $10,000. This could potentially provide a significant tax break, which is why negative gearing is a popular strategy with property investors.

Positive gearing

As you may have guessed, positive gearing is the opposite of negative gearing. It’s when the income you make on a property is greater than the expenses. This could provide you with an income, however it should be noted that you will most likely be required to pay tax on this income. Another term for this is ‘cash-flow positive’.

Depreciation

‘Depreciation’ is a term used to describe the decrease in value of an asset over time. With a property investment, it includes items like stoves, carpets and hot water heaters. Each of these items depreciates a little bit each year according to a Depreciation Schedule you have drawn up by a Quantity Surveyor, and these amounts may potentially be claimed back as a tax deduction.

Capital gains

A capital gain is the amount by which the property increases in value, relative to what you paid for it. A capital gain is usually realised when you sell the property. However, if your property goes up in value, you can often borrow against the capital gain (also known as accessing your equity) by asking a lender to value the property and refinance your loan.

Capital Gains Tax

Capital Gains Tax is the tax you pay when you sell an investment property that has gone up in value since you purchased it. You need to report capital gains (and losses) in your income tax return.

Equity

Equity is the proportion of the property that you own. So, if the property’s worth $600,000 and you owe the bank $100,000, you have $500,000 in equity. Equity can be used in a variety of ways, for example you can potentially borrow against it to buy additional properties or fund renovations.

Rental yield

The rental yield refers to the money your tenants pay you. Rental yield is calculated as a percentage of the property’s value. You can calculate the gross rental yield by multiplying the weekly rent by 52 weeks, divided by the property’s value.

LVR

LVR stands for loan-to-value ratio. Essentially, it’s the percentage of money you borrow for a loan, compared to the value of the property. Lenders generally like to keep the LVR within 80% - so you would need a 20% deposit. If you don’t have a 20% deposit, you will be subject to lenders’ mortgage insurance which protects the lender if you default on the loan. This can be expensive.

We hope you’re feeling more comfortable with the lingo now! Our role as your mortgage broker is to advise you how to structure your finance according to your property investment strategy, and find you the right investment loan for your specific financial circumstances and goals. So, if you’re thinking about making a property investment, please call us today!

This article provides general information and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or loan product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loan applications are subject to lenders’ terms and conditions, and eligibility criteria. Lender fees and charges will apply.


Rates On Hold 1.5%

Apr 3rd, 2018 • Industry News

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Cut Your Expenses and Increase Your Savings

Mar 29th, 2018 • Industry News

Top Ways to Cut your Expenses and Increase your savings