for-rent

How a Property Manager Can Make or Break Your Investment Experience

Choosing the right Property Manager is a crucial step in ensuring you have a successful and stress-free property portfolio.  Here, we show you how to ensure you choose the right property manager for your portfolio.

I think it’s fair to say that a property manager can make or break your investment experience – both from a stress and a financial perspective. This is largely because a poorly managed property will likely have a higher than average vacancy rate…and vacancy rates obviously have a direct impact on your rental return. Every week your property is vacant is a week the mortgage repayment comes out of your pocket.  If you have a large portfolio, or cash-flow is tight, extended periods of vacancy can have some investors questioning their sanity in deciding to invest in the first place!

But it doesn’t have to be like that. While rental vacancies are a part of life, a good property manager knows exactly what to do to ensure your property experiences minimal rental vacancy and gives you the maximum return on your investment.

A Good Property Manager

  1. Carefully screens and selects tenants to ensure your tenant is stable and reliable. This includes conducting thorough reference and employment checks.
  2. Is polite, courteous and responsive to your tenant. If you’ve ever been a tenant, you will know what it’s like dealing with a property manager who doesn’t return your calls or, worse still, is downright rude to you. If your tenant is moving out because your property manager is too difficult to deal with (and it happens…a lot), you’re better off staying with the tenant and getting rid of the property manager.
  3. Ensures legitimate maintenance items are actioned ASAP – nobody wants to live in a house that is falling down around them and your tenant is no different. (Plus, it’s in both the owner and the tenant’s best interest the house is kept in good repair).
  4. Conducts regular rent reviews to ensure your rent keeps pace with market movements. This is particularly important in a rising market but is often overlooked by property managers – especially where long-term tenants are in place.
  5. Stays ahead of the game in advertising and showing your property. If your property is a new build, does your property manager have access to the builder’s key to take prospective tenants through the property when it is nearing completion? Many of our clients have had tenants move in the day receiving keys to the property because our property managers work directly with the builder to have properties tenanted ASAP. If your property is tenanted, does your property manager maintain a good relationship with your current tenants to ensure cooperation with home opens and showing the property to new tenants ahead of their vacation?

How to Choose a Property Manager

Most people don’t ‘interview’ their property manager, but when you consider they are managing such a valuable asset, it is important to ensure you’re appointing the pick of the bunch rather than just selecting the real estate agent down the road. Asking property managers these few questions will go a long way to ensuring your investment is going to be managed effectively, efficiently and with a minimum of stress.

  1. Do they understand my needs as a property investor?
  2. How will they ensure I am getting the maximum rent for my property?
  3. Will I be able to easily communicate with my manager?
  4. What will happen when the manager goes on holiday or leaves?
  5. What process do they undertake to screen tenants?
  6. Will my tenant be able to easily communicate with the manager?
  7. How do they address maintenance items?
  8. Will I be contacted before any work is carried out?
  9. How often are inspections carried out and what information will I receive?
  10. How often will I receive rent?
  11. Will I receive an end of financial year statement free of charge?
  12. Can I speak with existing clients to find out their experience?
We recommend our clients in Western Australia use Rent Choice in Applecross as their property managers. Headed up by Caroline Nurse, herself a keen property investor and with an impressive work history spanning all aspects of real estate, Rent Choice knows exactly how to ensure your property is managed to maximise the return on your investment and with a minimum of fuss. If you’re in the market for a new property manager, we highly recommend you contact them.
saving money on a piggy-bank on the grass isolated on a white background
Want to make $9,000 by doing a couple of hours work?

Here, we show you how an ordinary household shaved almost $9,000 per year off their household expenses…. …without giving up a single thing! And the best thing is, once you’ve spent a couple of hours researching and organising, it’s done – no ongoing time commitment!

Sound too good to be true? Well, it isn’t! Have a look at the steps below.

  1. Make a list of all debts, repayments, direct debits – anything you regularly have to pay or that comes out of your bank account automatically. You list could look something like this:
  • Private health insurance
  • Credit Card repayment
  • Car loan
  • Gym membership
  • Charitable donations
  • Life Insurance
  • Car insurance
  • Home and Contents insurance
  • Telephone
  • Internet
  • Foxtel
  • Netflix

 

  1. Next, strike through expenses you can’t eliminate (such as your car loan) and expenses you use, but know you can’t reduce (for example, Netflix…who can live without Netflix?)

Your list now might look like this:

  • Private health insurance
  • Credit Card repayment
  • Car loan
  • Gym membership
  • Charitable donations
  • Life Insurance
  • Car insurance
  • Home and Contents insurance
  • Telephone
  • Internet
  • Foxtel
  • Netflix

 

  1. Now, it’s the fun part…

You might be surprised at some or all of the items on the list being expenses you can reduce, but believe me – it’s possible (and the below example will show you how)!

 Private Health Insurance

If you have hospital and extras cover, you can save a substantial amount of money here.

Login online or call your provider and ask them the amount they paid out for your extras cover last year (now is a great time to do it because your limits all reset on 1 January each year). Then, ask them how much you paid for extras cover that year… it’s likely that the amount they paid out compared to the amount you paid them is firmly in their favour.  If that’s the case – cancel your extras cover and just pay for services like optical and chiro when you need them. Otherwise, you may be able to select a cheaper extras package where you can select 4 services to be covered instead of the whole range…if you have comprehensive extras cover, you’re most likely paying for a whole lot of things you’ll never use (for us, it’s things like natural therapies and pharmacy).

You can also save some extra money by increasing the excess on your hospital cover – there’s a big difference in premium between a $250 and a $500 excess, so you’re better off choosing the higher excess and paying when/if you need to rather than paying additional premiums each month for something you may never use.

If you’re gone through this exercise, you’ve probably saved quite a bit of money here. You can choose to either stay with your current provider on the reduced rate and take the money and run OR if you’re really keen, you can go one step further and look for another provider to see if they can beat your current deal.

Here, our example family saved $66 per month which works out to be $792 per year just by increasing their excess and switching to a nominated 4 extras instead of a full extras package!

Home, Contents, Car insurance

Essentially, you can do the same as the above with your home and contents insurance – look at what you’re paying for that don’t use.

For example, accidental breakage is something that most people don’t use because the thing that breaks isn’t worth much more than the excess…so why pay for it ‘just in case’? With all the money you’ll be saving, you can just pay to replace a tv or iphone it if/when it breaks rather than by paying for the extra premium each year.

Here, our family saved $58 per month on home and contents insurance by switching to another provider and choosing a policy without ‘accidental damage’ cover.

Car insurance – same deal, don’t pay for extras like hire car cover and extra windscreens…lower your premium and pay for those items only  if and when you need them. In all my years of driving I’ve only ever needed to replace one windscreen and from memory it cost me about $250…

By switching insurers to a ‘no frills’ policy, our example family saved $50 per month on car insurance for two cars…which is a saving of $600 per year. Not bad for less than an hour’s worth of telephone calls and emails…

So, annually, by switching home and contents and car insurance, our family saved which is a saving of $1,296 per year. Not bad for about half an hour’s worth of telephone calls and emails…

Telephone, Internet, Gym Memberships

You can apply the same principles as above to your telephone, internet, gym memberships and Foxtel. Go forth and save some cash…you’re welcome.

With the Foxtel and gym membership – really ask yourself if you use it and get benefit out of it. For me, I cancelled my gym membership because, to be honest, I hardly ever used it and prefer to do some different exercise. Be honest with yourself and if you don’t use it, don’t pay for it (just don’t spend the extra money you’ve saved on cake and icecream).

 

Credit Cards

Do you have low rate credit cards? Ditch the rewards points and go for the lowest rate possible.

Do some research online and see if your credit card provider has a card with a lower rate than the one you’re on. If you’re carrying some credit card debt, you really need to pay that off…so call your provider and ask them if they can switch the debt to a lower rate card. Our example family did this, and saved $230 per month on the minimum repayment of a reasonably hefty credit card debt. That’s a saving of $2,760 a year extra that they can pay directly off the debt of the credit card per year without contributing one extra cent to their current repay,e

If your provider won’t do that, have a look around for a 0% balance transfer but MAKE SURE YOU PAY IT OFF IN THE TIME PERIOD or you’ll be stung with extra interest.

Mortgage interest rate

Did you know you can call your current home loan provider and ask them if they have a better deal for you? Our family did this and saved $54 per month.

If you want to get an even better deal, you could think about switching banks altogether, there’s often great introductory deals for new customers, and with current low interest rates, there are some great deals which could save you thousands in extra interest each year.

Charitable Donations

I’ll start this by saying that it is great to donate to charities we care about – and charities do a lot of good in our community. BUT if you’ve signed up to a monthly direct debit for charity (or three) and you have debt you’re trying to pay off…you should consider cancelling it just for now.

By all means, donate to charity, but consider making your donations in cash when you know you have the money spare and not as an automatic monthly commitment.

Our family was donating almost $1,000 per year through direct debit donations in addition to extra cash donations while they were carrying a huge credit card debt…by cancelling the direct debit donations they reduced their monthly expenses and can divert that money to paying off their credit card debt.

 

Your list

Your list might look the same or a bit different to this one – but we highly recommend you go through the exercise. The start of a year is a great time to go through this process and see where and how you can save some money and improve your financial position. Think about what you could do with the extra money – like going on a family holiday or paying out some debts, all with just a couple of hours of work!

We’d love to hear about your results after you go through this process, so please leave a comment below.

 

business, people and teamwork concept - group of smiling businesspeople meeting in office

Should You Consider Investing in Property Syndicates?

Investing in a property syndicate may seem foreign to many people, but there are a number of advantages to joining forces with others to invest in property.

Whether for a residential property development or the acquisition of a commercial property, both investment vehicles can deliver great returns to investors. However, both of these investment options require a substantial amount of capital – which is prohibitive to many investors due to simply not having the financial capacity either by way of cash or equity for the deposit, the ability to service the loan, or both.

For example, a commercial property costing $2 million to purchase  usually requires a loan-to-value ratio of 65-70%, which would result in a deposit of around $600,000 in addition to a sizeable loan.

While many investors are able to fund residential developments on a smaller scale, such as duplex or triplex properties, larger apartment-style investment options are largely out of reach.

For these reasons, a property syndicate is an accessible option that allows investors to be involved in larger projects for a lower cost.

A draw card of investing in larger assets is that they typically provide investors with higher returns or profits and access to better quality investments than they could achieve on their own.

Additionally, investors keen to expand their portfolio who no longer have the capacity to service a mortgage on a home loan, but who may have equity or cash they are looking to invest, can continue to expand their investment portfolio through property syndicates, and receive an attractive return on their investment.

The key to selecting a suitable property syndicate is to carefully select the developer to ensure they are experienced and have a strong track record of similar projects. Additionally, take the time to read and understand the contract terms, and have the document reviewed by a lawyer, financial advisor or accountant.

While property syndicates aren’t suited to every investor, they are worth considering to determine if they are a suitable method to assist you to achieve your investment goals.

*This article is for information purposes only. Our blog posts are not intended as financial or investment advice and should not be relied upon for any purpose. Before making financial decisions, you should seek advice from a qualified and registered financial or investment adviser.

 

 

The graph shows the growth and profit. Income from a successful investment. Bank asset growth through profitable investments. green background. dollar sign

Is now a good time to invest?

With so much doom and gloom being reported almost daily about all classes of investment lately, many people are wondering if now is a good time to invest, or if the best option is to sit tight and wait and see what happens in the property and share markets.

While it may be a volatile time to invest in some respects, many experts believe those willing to stomach some financial pain in the short term may just pick up a bargain, and we most definitely agree.

As we always say, it is important to remember that property investment is a long-term investment strategy. When you stop looking to make a quick buck, investing becomes much easier and can be relatively stress-free. As a general rule, if you purchased property in Perth twenty years ago, you would be in a far greater financial position today than if you didn’t, with most properties being worth hundreds of thousands of dollars more today than their purchase prices two decades ago. But, if you think back over those twenty years, you will recall periods of significant market fluctuation and times when property values slumped, including a recession and the GFC. The smart investors know that the market is cyclical, but the property market has trended upwards over the longer-term. Without reservation, most (if not all) investors who have held property for the long term are more than happy that they did so.

When the market is depressed, it can be a great time to buy and hold assets – with interest rates  low and purchase prices down, it can be the perfect time to pick up a carefully selected asset that will perform for you over the long term.

So what should you look for when purchasing property in a slumped market?

Property investment is a numbers game, and ideally you want your investment proposition to be as close to neutral (or even positive) cash-flow as possible. This means that when you consider all of the outgoings (mortgage, rates, rental expenses etc) and your income (rent, tax refunds, benefits of off-setting and increased cash flow), your net monthly financial position is either improved or remains the same. This principle applies in any market, but with interest rates currently low it is a great time to buy and hold assets for a very low cost.

We always recommend having any proposed property investment assessed by a professional who has the tools, software and market knowledge to accurately analyse the investment and its effect on your overall financial position. Any investment can be like shooting fish in a barrel without the right advice and guidance , and property investment is no different.

If you’d like to know more about buying property in a slumped market, we’d love for you to get in touch.

* Our blog posts are general in nature and are not intended to be relied upon for any purpose whatsoever. This article does not constitute financial advice.

Mortgages and Financial Services

How Changes to Negative Gearing Will Effect Property Investors

There is a lot going on in the property investment space at the moment, with both sides of politics talking about proposed changes to negative gearing. Speculating on the changes to be made can be quite unsettling, however it is important to note that, even if changes are made to negative gearing, no changes will be made to the current system until July 2017.

For those of us who already own investment property, we can breathe a little easier as it is likely that the current negative gearing system will be grandfathered (meaning that negative gearing will remain available on that property for the current owners despite any changes that may be implemented for properties purchased after July 2017).

If you don’t currently own an investment property, now is the time to buy…
If you’re not yet a property investor, or you’re an investor thinking of purchasing more property, now is the time to enter the market.

Changes to negative gearing are not proposed to commence until after July 2017 – meaning that any property purchases made before that time will remain eligible for negative gearing as it currently stands.

calculator with taxes text and 1040 tax form lying on wooden desk with place for text

Do you need a PAYG Tax Variation?

What is a PAY Tax Variation

Put simply, a PAYG Tax Variation is available to property investors as a way of improving cash-flow to assist in paying the expenses incurred through owning an investment property.

By completing a PAYG tax variation, the investment property owner’s employer will reduce the amount of tax withheld from the property owner’s pay to reflect set deductions like interest, rates and depreciation on a rental property. In essence it is a way of decreasing the amount of tax paid by the investor each pay period.

Essentially, a Tax Variation means you receive your tax refund every pay cycle, rather than in one lump sum at the end of the financial year.

In our view, every property investor should consider a PAYG variation. While often overlooked by investors, the PAYG system is a great way to increase fortnightly cashflow throughout the year which in turn enables you to put those extra funds to use in achieving your financial goals.

What could you do with extra cash each fortnight? Our recommended option is to use it to save on interest costs by paying your current mortgage off faster. It is also a way you can fast-track savings for your next investment property deposit, or even go on a holiday. There are so many possibilities, but the main thing is that you get to decide how you make that money work for you.

A PAYG variation means that the property owner’s employer will reduce the amount of tax withheld to reflect set deductions like interest, rates and depreciation on a rental property. In essence it is a way of decreasing the amount of tax paid by the investor each pay period. 

It is important to note that submitting the PAYG variation does not replace a normal tax return. A tax return still needs to be filed at the end of the year to calculate the actual amount of tax liability. Your PAYG instalments for the year are credited against your assessment. For this reason, we recommend being conservative in your estimated deductions to avoid receiving a tax bill at the end of the year.

To accurately determine the depreciation values to be used in your PAYG Variation, we recommend the services of a quantity surveyor. A quantity surveyor can provide all current and future depreciation values for investment properties in a detailed tax depreciation schedule, and the schedule does not need to be completed every year – one schedule will contain depreciation for the entire useful life of the building, fixtures and fittings. Obtaining the report immediately after the purchase of a property will allow the maximum return from a PAYG variation, as the precise figures will make the instalments accurate. 

The flexibility provided to the Investor through a PAYG variation, combined with depreciation deductions identified by a quantity surveyor, can be of great help in managing the fortnightly cashflow of an investment property. If you are an Investor and you don’t have either of these in place, we strongly recommend you look into them. Your accountant can help you put the PAYG Variation in place.

If you’d like more information about how a PAYG Tax Variation or a depreciation schedule may benefit you, don’t hesitate to contact us.

Modern spacious lounge or living room interior with monochromatic white furniture and decor below three tall bright windows with a dark bookcase accent in the corner.  3d Rendering

The Hidden Costs of Building a New Home

If you’ve ever built a home before, it’s likely you were surprised at the difference between the actual cost of the build and the advertised price of the home design you had chosen. As an outraged friend of mine said after she’d attended her pre-start for a new home “it’s like they’re selling you a car with no tyres!”. More accurately, it’s like they’re selling you a house with no floor coverings, window treatments or light fittings (just to name a few).

Typically, the advertised price of a house and land package includes the cheapest possible block in the advertised location, and a house that doesn’t include many of the essentials such as carpets, window treatments, internal painting and other often overlooked details such as light fittings, exterior lights and more. Often, it isn’t until somebody signs for a block and sits down with the builder for their pre-start that they find the home needs many costly inclusions.

Perhaps worse still, it’s easy to get caught out after the build is completed to find that you aren’t getting the home you thought you were. Clients of ours told us a story of an investment property they had previously built which, unbeknownst to them, did not include internal wall painting – and it wasn’t until the keys were handed over and a tenant was ready to move in that the owners discovered there was not a single drop of paint on the walls. Given the timeframe, it wasn’t possible for the owners to arrange a painter, and with the husband working away FIFO it meant the wife had to spend a week painting the new house solo so the new tenants could move in as planned.

So, how can you avoid unexpected costs and nasty surprises?

If you’re building through a regular residential builder, it’s important to make sure you always read the fine print and don’t expect that the advertised price for a house design is going to be the price you pay. Even the little things like extra power points really do add up, and it’s easy to add several thousands of dollars to the price of the build during your pre-start just by adding small, but most likely necessary, details.

When choosing a builder, take the time to compare all the details. Oftentimes, there will be many additions required to the base specification as advertised by the builder to have a finished home that is ready for a tenant to move in to. For example, does the home you’re building include a letter box? A washing line? Front and rear landscaping? These additional items may cost more than you expect, so it is important to consider all of the small and not-so-small details before you sign on the dotted line.

We take the stress out of building

Not only do we ensure your newly built home is all inclusive and ready for a tenant to move straight in, but we take all of the other stresses out of building a property.

We take care of dealing with the builder, developer and settlement agent as much as possible on your behalf to ensure your build is completed on time and to a high standard, with as little impact on your time and your lifestyle as possible. We also assist you with securing a property manager and importantly a tenant, because unlike a builder, our relationship with you doesn’t end when the build is completed – we will always be here to assist you to make sure you’re getting the best possible return on your investment and that your financial strategy is helping you to achieve your goals.

Our service is free, so if you’re thinking of building an investment property give us a call.

 

 

 

Modern apartment buildings in new neighborhood .

Should You Invest In An Off-The-Plan Apartment?

 

Apartments and off the plan apartments are often attractive options for novice investors – the marketing, the brochures and the sales people provide a level of information not readily available with other property types. This, combined with the glossy brochures and slick sales and marketing can be really enticing for investors.  However, with one exception, we do not recommend investing in Perth apartments and we especially caution against investing in anything off the plan.

Generally speaking, there are only a few circumstances where we would recommend considering an apartment as an investment; for example if affordability is an issue or the investor is using a varied investment strategy. In the event an apartment is purchased, selecting the ‘right’ apartment is crucial.

What is the problem with off the plan?

The problem with purchasing off the plan is there is normally no ‘subject to finance’ clause in the contract. Typically, the investor pays their 10% deposit, which could be anywhere up to $60,000 or more, and does not need to apply for finance for quite some time, often not for a year.  A lot can change in a year. Your circumstances could change, and perhaps finance that would have been approved a year ago will not be approved at the time you need it to be to go forward with your purchase of the apartment. Or, the bank’s lending criteria could have changed as has occurred recently with the APRA restrictions on investment lending. Or any number of other things could have changed that mean you are just not in a position, for whatever reason, to go through with the purchase. So guess what happens to your deposit? You lose it. It can be money absolutely down the drain.

 

More broadly though, we just don’t think Perth apartments are a great investment right now, and there are better investment options out there, for the following reasons:

  • Perth has an oversupply of apartments. Don’t believe me? Just look on www.realestate.com.au or take a drive around the inner city suburbs and have a look at all the new construction going on. Apartments are springing up everywhere and that makes for hefty competition when it comes time to rent or sell. Basic supply an demand tells us the more of something that’s available the lower the price, and this could not be truer for re-sale of apartments and apartment rental yields. Neither of these things are what you’re looking for in an investment.
  • Apartments have additional fees. Strata levies, maintenance levies, special levies – why pay these if you can invest somewhere else that doesn’t have them? Additional fees and costs where you can avoid them do not make sensible investing.
  • When property goes up on value, it’s usually the land portion that has the highest increase. Land is the scarce resource when investing, so appreciates much faster than a dwelling.
  • Apartments tend to have more transient tenants and are generally a ‘stepping stone’ residence until something better comes along. To make matters worse, when your tenants do move out, you’re likely to have a higher vacancy rate in an apartment due to the competition in the marketplace.

As we noted above, there are a limited set of circumstances where investing in an apartment may be an appropriate strategy for you. However, we are firm believers that the most valuable long-term investment is in house and land and, where possible, this should be where your place your investment dollars. Above all, remember that property investment is not a short-term wealth creation tool, you need to be in it for the long haul. Choose your investments wisely, use an effective debt-reduction strategy, manage your properties well, and you will be on-track to achieve a secure financial future.

*This article is for information purposes only. Our blog posts are not intended as financial or investment advice and should not be relied upon for any purpose. Before making financial decisions, you should seek advice from a qualified and registered financial or investment adviser.

 

Is ‘flipping’ property really as easy as they make it look on TV?

For those unfamiliar with the term, ‘flipping property’essentially refers to buying, renovating and selling a property with the intention of making a relatively fast capital gain, and it is fast becoming a popular property investment strategy. With so many ‘celebrity renovators’ and  numerous renovation TV shows like The Block gracing our screens, it’s not hard to see why people have become so attracted to renovating for (hopefully) a profit.

However, this strategy is definitely not without its pitfalls. If you’re a licensed tradie and you’ve got a whole lot of time and mates you can rely on to help you get the job done, then maybe – and only maybe – it’s a viable option.
For the rest of us, one mistake or unexpected event could blow out the entire projected profit of the project (because you’ve done an accurate feasibility study on the project, right?). Add this to the fact that every day the property sits on the market waiting to be sold costs you more and more and eats away at your bottom line, you’ve got, in our opinion, a pretty risky property investment proposition.
Apart from this, there is so much more to flipping property than just renovating and selling – it’s making sure you are absolutely diligent in your pre-purchase property research and analysis and it involves being a total bean counter to make sure you maximise your return on investment. And, just like any other reno, it’s time consuming, likely to be more expensive than you think, and stressful.
If you aren’t an experienced renovator, there are property investment strategies available to you that offer far less risk and take much less of your time (and dare I say, blood, sweat and tears!), and we always recommend canvassing all options before you commit to something that may not be suitable for you.

If you would like to know more about property investment and our thoughts on flipping, or would like a copy of our free report on Property Investment Strategies, please don’t hesitate to get in touch.

Low interest rate cut represented by scissors cutting a red price tag with a percentage sign.

Do you know your current mortgage interest rate?

 

Do you know what your current mortgage interest rate is?

Through our affiliate mortgage brokers, we are surprised just how often clients aren’t aware of how their current home loan interest rate compares to the rest of the market.

We understand how it can be one of those things that people often set and forget, but unfortunately, by not keeping abreast of what rates are available in the market-place, you could potentially be paying thousands of dollars each year extra in interest.

While it can often seem daunting to decide which financial product is for you and perhaps difficult to unravel your banking, using the services of a Mortgage Broker can assist you in determining which mortgage is right for your circumstances and can make the process of switching lenders a breeze.

We have close relationships with mortgage brokers who we believe are some of the best in town, so if you would like a free health check of your home loan get in touch with us and we can point you in the right direction.

 

*This article is general in nature and is not intended as financial or investment advice. Our blog posts are for information purposes only and should not be relied on for any purpose. Before making any financial decisions, you should seek advice from a qualified and registered financial or investment adviser.