Viewing by month: March 2013

How investors can leverage current lending conditions

With the Reserve Bank of Australia’s next interest rate decision now less than two weeks away, many investors will likely be crossing their fingers for another rate cut. The reality – however, is that regardless of whether or not the RBA elects to cut rates further, the residential real estate market is currently positioned attractively for investors. To provide some insights into how current lending conditions can be maximised, I’ve decided to share the following piece by CENTURY 21 Home Loans’ Chief Executive Officer, James Green, which appeared in the March edition of CENTURY 21 Wentworth’s Property Investor.

Top finance and refinance tips for investors - part one

With interest rates at relative lows and further rate cuts potentially on the cards, many investors will likely be looking at their portfolio expansion and/or refinancing prospects. At present, interest rates are at levels not seen since the GFC - however, economic conditions, both domestically and abroad, are much stronger than they were during that period. 

Housing prices may be on the road to recovery, rents are steadily rising (it is actually cheaper to buy and undertake a mortgage than it is to pay rent in many suburbs across Australia), buyer competition is gradually increasing, and stock markets are hitting new highs. 

What this means, is that right now may be an ideal time to consider making your next property purchase or, at the very least, refinancing the loans on your existing investments. While Australia's real estate market does appear to be heading north, it remains very much at a point that is opportunistic for investors. 

In this two part series, I will share my top finance and refinance tips for investors looking to make the most out of current lending conditions.

USE A MORTGAGE BROKER 

The first thing that I would recommend is to use a mortgage broker to ensure that you are getting the best deal possible on your investment loan. Mortgage brokers provide a free service and usually have established relationships with over 20 lenders, including all of the major lenders. As such, mortgage brokers are often better equipped than investors when it comes to negotiating strong loan deals. 

For example, we recently worked with a client at CENTURY 21 Home Loans who had previously been using a private banker to secure his home loans. When the client came to us, he had over $10 million worth of finance and was looking to purchase a property for approximately $980,000. 

CENTURY 21 Home Loans conducted a home loan check on the client's behalf and discovered that he could save approximately 0.6 per cent on repayments by refinancing his existing loans. As a result, the client saved approximately $60,000 per annum in interest, which was the same amount as the yearly mortgage repayments on his new property purchase. When looked at in this way, the client essentially got the property for free - simply due to an adjusted rate.

REFINANCE YOUR INVESTMENT LOAN EVERY TWO YEARS 

Investors should aim to refinance their home loan every two years. Why is this? Because the banks that are the cheapest at a particular point in time do not usually remain the price leaders for very long, particularly in fluctuating interest rate environments like the one Australia has seen over the past twelve months. 

It's not just about price however; your personal circumstance may change in addition to lending criteria and loan products, meaning that the loan which was once best suited to your circumstances may no longer be the optimal option. 

Changing your investment loan every two years may lead to a number of potential benefits. Firstly, it could enable you to secure lower repayments on your loan.  Secondly, you might be able to secure a more suitable package for your current situation. And thirdly, it could potentially allow you to save thousands of dollars in interest through refinancing your loan at a lower rate. 

In most cases, you can do this for no cost which means that you can only stand to benefit.

UTILISE AN OFFSET ACCOUNT 

If you're considering taking out an interest only loan to purchase your next investment property and wish to fully unlock the potential of your borrowing, it would be wise to look into setting up an offset account. 

An interest only loan requires the borrower to meet the loan's interest repayments whilst leaving the principal amount untouched. However, with an offset account, the interest on the principle reduces in accordance with the balance of the offset account. 

Typically, monthly repayments are calculated by determining the balance of the principal amount, multiplying this balance by the current interest rate, and then dividing the resulting total by 12. However, the equation changes when you factor in an offset account; the balance of which is deducted from the principal, leaving you with a reduced interest payment. 

Offset accounts provide investors with an excellent way to reduce their interest bill without reducing their liquidity. This is important because it enables them to immediately redeploy the capital into new investment opportunities as they arise. 

Unlike the typical restrictions placed on a standard principle and interest loan, withdrawing funds from an offset account does not incur standard penalties usually associated with withdrawals.

UNDERSTAND HOW TO LEVERAGE INTEREST RATES FOR YOUR BENEFIT 

One of the most common questions asked by property investors is whether to fix, float or split a home loan between fixed and variable. 

When making this decision, the most important thing to do is review your individual circumstances and weigh up the advantages and disadvantages of the different loan structures available. After all, you don't want to lock in a loan that doesn't properly account for your current and future circumstances. 

If you are looking at securing a fixed rate loan, it is important to consider how long you intend to hold on to the property in question. Fixed rate loans are usually best for investors that intend to keep their property for a longer period of time. If, however, you're an investor who wants to sell in one or two years, a variable loan product may be better suited to your needs.

At present, short term fixed rates are lower than both variable rates and average rental yield rates. What this means is that you can potentially lock in a fixed loan product at a lesser rate than what your incoming rent is, which is more than ideal. In fact, I've recently seen some lenders offering three-year fixed home loans at 4.99 per cent interest. Conversely, the best variable rates on the market appear to be hovering around 5.17 per cent. 

The wider the gap becomes between variable interest rates and fixed rates, the more sense it will make to fix at least part of your loan. 

Understandably, some investors may be holding off on locking in a fixed rate product in the hope of further rate cuts. However, it is important to recognise that interest rates are currently at relative lows and potentially at the bottom of their cycle. Striking a good deal on your loan doesn't always mean securing the lowest rate; the vital factor is to lock in a rate below the historical average, and almost all of the loan products currently on the market offer this. 

It is worth noting - however, that most fixed rate loans limit your ability to make extra repayments. In such cases, if your circumstances unexpectedly change and you require early repayment of your loan, you could face some hefty early exit fees.

When all is said and done, nobody can guarantee you what loan facility will save you the most money in the long-term. The best thing that you can do for yourself is properly research the market and aim to make an informed and considered decision. To this end, a CENTURY 21 mortgage broker can be an invaluable resource as they will provide you with a range of options to help you select the best product and associated rate for your personal situation.

For more information on property finance options, contact a CENTURY 21 Home Loans broker today.



2 comments | Posted by Charles Tarbey on 26/03/2013 at 12:00 AM | Categories:

CENTURY 21 observes momentum building in housing market

CENTURY 21 has started to observe improving market conditions that may indicate the Australian property market is moving into a new growth phase.

“Capital city dwelling values recorded growth in both January and February and, when this is combined with strong auction clearance rates, low interest rates and improving consumer sentiment – it is probable that the market is entering a new phase,” said Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey.

“While it is still too early to call a complete recovery, leading indicators look very positive for this year.”

A recent survey by RP Data and Nine Rewards showed that four out of five consumers believe that now is a good time to buy a home. Fifty-one per cent of those surveyed believed that house prices would rise over the next 12 months. 

Interest rates remain at relative lows and transaction volumes have trended up since the start of 2012 which suggests that people are growing increasingly comfortable to buy or sell property.

“CENTURY 21 believes that consumer sentiment is a key to fuelling a sustained growth period. With this in mind, it may pay to monitor the health of the Australian economy very closely this year,” concluded Charles Tarbey. 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.



0 comments | Posted by Charles Tarbey on 22/03/2013 at 12:00 AM | Categories:

Top tip for property investors – claim deductions on your outdoor features

For property investors, it is important to maximise the depreciation claims available for their properties. After all, if you can reduce your tax payments, you’ll usually have more capital available to make further property acquisitions and expand your portfolio. One potential depreciation claim that is often overlooked by property investors is the deduction for outdoor structures, fixtures and fittings. To provide some more information about this topic, I’ve decided to share the following piece by Managing Director of BMT Tax Depreciation, Bradley Beer, which appeared in the February 2013 issue of CENTURY 21 Wentworth’s Property Investor.

 

OUTDOOR APPRECIATION INCREASES DEPRECIATION – CLAIM DEDUCTIONS ON OUTDOOR STRUCTURES AND SAVE

 

When it comes to claiming depreciation on investment properties, many investors are unaware of the deductions that are available on outdoor structures, fixtures and fittings.

 

Items outside of a building can add value to a property. Rather than ignoring the street appeal, investors can include items in the yard or outdoor area to help attract potential tenants. The investor can then maximise their deductions by claiming depreciation on the eligible items in the front yard, backyard and balconies of their properties.

 

Deductions can be claimed on these outdoor assets as either capital works allowance or plant and equipment depreciation.

 

Capital works allowance, also known as a building write-off, is based on the historical cost of a structure, excluding the cost of plant and non-eligible items. Outdoor structures which qualify for the capital works allowance include retaining walls, fencing, sleepers, concrete slabs, patios, clothes lines and in-ground pools.

 

Plant and equipment items, including removable or mechanical assets, are also eligible for depreciation deductions. Each plant and equipment item has an effective life set by the Australian Taxation Office.

 

The depreciation available on each item is calculated using the effective life. Some depreciable outdoor plant and equipment items commonly found outside a property include outdoor furniture, garden sheds, garden hoses, solar lights, pool filters and pumps, and garden watering systems.

 

Assets outside of a property can be worth thousands of dollars. Investors should take special notice when old assets including retaining walls, garden sheds and driveways are removed and replaced during a renovation. They may be entitled to claim 100 per cent of the unclaimed value as a deduction. A specialist quantity surveyor is qualified to calculate values and construction costs of these items and can ensure that investors are not throwing dollars away.

 

Article Provided by BMT Tax Depreciation.

 

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation.

 

Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service.


2 comments | Posted by Charles Tarbey on 18/03/2013 at 12:00 AM | Categories:

RP Data flags positive housing market sentiment

 

Recently released figures from RP Data suggest that housing market sentiment could be heading north.

 

According to a consumer sentiment survey carried out by RP Data and online survey firm Nine Rewards in the first week of March, 80 per cent of consumers believe that now is a good time to buy a home. These results were an improvement on the 76 per cent of survey respondents who, last October, said that it was a good time to buy property.

 

The report revealed that 38 per cent of survey respondents expect house prices to rise over the next six months, while 51 per cent predict price increases over the next 12 months.

 

Commenting on the report, RP Data’s National Research Director, Tim Lawless, said, “The results revealed distinctive differences from region to region where, as an example, 60 per cent of respondents in Perth expected prices to rise over the next six months, whereas Tasmania delivered a much more sedate reaction of only 30 per cent.

 

“As consumer confidence in housing market conditions rises, we are likely to see a larger number of dwelling sales as the year progresses. Transaction data from last year was already showing an improvement in home sales, with 7.6 per cent more homes transacted over the second half of 2012 compared with the first half.”

 

The report detailed factors that consumers are likely to consider when purchasing a property. Over half of the survey’s respondents said that personal financial situations are the most important factor, followed by capital growth in the housing market (20 per cent) and interest rates (12 per cent).

 

Encouragingly, only eight per cent of respondents expected house prices to fall over the coming twelve months.

 

“If the survey responses are anything to go by we should see a continuation of this trend through 2013,” concluded Tim Lawless.

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.

 


0 comments | Posted by Charles Tarbey on 15/03/2013 at 12:00 AM | Categories:

Rate hold as Autumn selling season begins

CENTURY 21 believes that the Reserve Bank of Australia’s decision to keep interest rates on hold will encourage many buyers to make a property purchase in the traditionally busy autumn real estate season.

 

“At its March meeting the Reserve Bank elected to keep the official cash rate steady at three per cent for a fourth consecutive month,” said Charles Tarbey, Chairman and Owner of CENTURY 21 Australasia.

 

“This move suggests that the Reserve Bank feels relatively comfortable with current economic conditions which, in combination with relatively low interest rates, should help to provide a level of confidence for buyers looking to secure a property purchase.

 

“CENTURY 21 is starting to see a lot of buyers get off the fence and this decision should only increase that trend.”

 

As part of its decision, the Reserve Bank reasoned that it was prudent to leave the cash rate unchanged in light of recent economic information, the expected rate of inflation and the fact that there had been a substantial easing of monetary policy in recent decisions.

 

The Reserve Bank’s decision follows the recent release of RP Data-Rismark’s Hedonic Home Value Index results, which showed that median home values In Australia’s capital cities rose 0.3 per cent in February, following a 1.2 per cent increase in January.  

 

“In terms of the Australian residential property market, we have seen a combined 1.5 per cent rise in capital city dwelling values over the past two months and auction clearance rates pick up to levels not seen since mid-2010,” continued Charles Tarbey.

 

“For the time being, buyers can take advantage of another month of rates on hold at attractive levels,” concluded Charles Tarbey.

 

CENTURY 21 encourages potential buyers that are looking to purchase real estate to ensure they have obtained the appropriate professional property and finance advice before doing so. 

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans


0 comments | Posted by Charles Tarbey on 11/03/2013 at 12:00 AM | Categories:

New home sale figures remain positive over January

According to recently released figures from the Housing Industry of Australia (HIA), new home sales posted a fourth consecutive monthly rise in January.

 

These figures reflected a 4.9 per cent increase in multi-unit sales, and a four per cent increase in the detached housing segment.

 

“It is promising to see the momentum of late 2012 carrying on into the new year,” said HIA Chief Economist, Harley Dale.

 

“Over the three months to January, new home sales increased by ten per cent, although sales volumes were still 6.5 percent lower compared to figures a year earlier.

 

“Even now, the volume of detached house sales is not much more than half the long-term average. Consequently, there is a long way to go to see evidence that new home building will reach the levels the economy requires as the contribution from resources-related investment wanes.”

 

Victoria (+9.1 per cent), South Australia (+10.6 per cent) and Western Australia (+7.4 per cent) all experienced increases in new home sales over January, while New South Wales and Queensland saw declines of 1.3 per cent and six per cent, respectively.

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.


0 comments | Posted by Charles Tarbey on 08/03/2013 at 12:00 AM | Categories:

Tips for selecting a property investment bargain

For many investors, particularly experienced ones, the hardest part of growing a property portfolio lies not in securing adequate finance, but in identifying strong property investment prospects. How does an investor assess whether or not a property is likely to deliver the capital growth and rental returns that they expect? And furthermore, how can they be sure that they are paying a good purchase price? To help answer these questions, and more, I’ve decided to share the following piece by Empire CEO, Chris Gray, which appeared in the February 2013 issue of CENTURY 21 Wentworth’s Property Investor.

How to buy and negotiate like a professional and bag a bargain

Buying property cheaply isn't about ripping off unsuspecting sellers or finding a never-before-seen, too-good-to-be-true deal. Professionals make money from property by understanding the market and knowing what to buy. 

It's true that buying a property for less than market value does make you money, but since you can only buy the property cheaply once, you will only make a profit once. A property in a bad area may be priced cheaply, but if no one wants to buy or rent it from you, there is little chance of achieving significant capital gains. 

A true bargain can be a regular-priced property that has a uniqueness which not everyone recognises. The truth is that you have to spend money to make money. If you understand how professionals buy and negotiate to get property slightly cheaper, you could bag the ultimate bargain.

RESEARCH 

This is a crucial element, so set aside a good amount of time. The first step is knowing what to buy: 

Are you investing for capital growth or for rental yield? 

Are you buying to hold or to renovate and sell? 

How much cash and income do you have available? 

How much time and effort are you willing to put into your investment strategy? 

My advice? Anyone earning a reasonably high income and who can service the cash flow on a property should focus on capital growth. Median priced properties that are closely situated to the main capital cities, where the fundamentals of supply and demand are good, are the most profitable purchases. 

Next, do some research into the best suburbs to buy and median property prices. There are free sources of information: 

Newspapers; 

Magazines; 

Property websites;

And sources where you have to pay: 

Australian Bureau of Statistics; 

RP Data; 

Residex; 

In my experience, you get what you pay for, so it's worth investing in the most up-to-date and unbiased information. 

GROUNDWORK 

In order to have a sound understanding of property values and what's available in a new area, you need to inspect and analyse at least 50-100 properties. After your research, combine all the vital statistics on a spreadsheet and compare like with like. Consult with local real estate agents and property managers who can provide you information on what's in demand. 

KEEP A FINANCIAL PERSPECTIVE 

Buyers can often get emotional over a property purchase which can freeze their decision making. It's important to remember to keep a financial perspective as there's a lot of money at stake. Property investors need to make factual decisions and have a firm understanding of what to buy and what not to buy.

YOU GET WHAT YOU PAY FOR 

Everyone wants a bargain but the truth is that you always get what you pay for. It's important to concentrate on the bigger picture and focus on the capital gain that you can accumulate in the long term. There are ways to get a property slightly below market value, but purchasing a blue-chip property in a blue-chip suburb will give you the best returns in the long term. There's a limit to how much you can save, but no real limit to how much you can make. 

About Chris Gray:  Chris Gray began investing in property at age 22 when he worked out that it was cheaper to own a three bedroom house than a one-bedroom unit. He turned an initial deposit of $35,000 into a portfolio that is today valued at over $10 million. A qualified accountant, buyers' agent and mortgage broker, Chris is passionate about inspiring others to achieve financial freedom through property. He is the CEO of Empire which builds property portfolios for other people - searching, negotiating and renovating on their behalf. Chris is the host of "Your Money Your Call" (Fridays on Sky News Business Channel), a position that sees him interview other leading industry figures. Further information is available at www.chrisgray.com.au and www.yourempire.com.au.


1 comments | Posted by Charles Tarbey on 04/03/2013 at 12:00 AM | Categories:

Selling in autumn

It has been said that spring traditionally offers the most favourable conditions for selling properties. However, one potential issue for spring sellers is that many competing vendors may aim to capitalise on the season’s benefits at the same time – something that can work to drive competition up and selling prices down. 

Autumn, on the other hand, presents relatively similar conditions to spring, but is generally not seen to offer such a prime selling environment. This factor presents a great opportunity for vendors to leverage the selling benefits of autumn without the higher competition levels usually seen in spring. 

Here are four key factors to keep in mind when considering whether or not to sell in autumn:

1) Take advantage of the weather: autumn often strikes a pleasant balance between summer’s scorching heat and the colder winter temperatures. As a result, prospective buyers often have a higher level of natural physical comfort in autumn which can help to create a more positive viewing experience. 

2) Seasonal lighting: April sees the end of daylight savings time, which means that some sellers will likely be faced with more challenging lighting conditions. As such, it may be necessary to introduce measures to ensure that the property is sufficiently lit. For example, if conducting open-houses, it will be important to make sure that all rooms in the property are fitted with properly functioning light bulbs. 

3) Appeal to the senses: try to present inspections as more than just regular open-houses. To this end, you may want to consider utilising the scents and hallmarks of the autumn season to turn your routine inspection in an open-house experience. For example, cinnamon wafting through the air and a strategically placed bowl of crisp red apples could prove to be rather persuasive; 

4) Think about the buyers that you want to attract: the year is already well underway; children have settled into school; parents and professionals alike have returned to work; and, as such, prospective sellers may need to be a little more flexible when it comes to scheduling inspections. Consider your target buyers, think about the times that they’re likely to be available, and then aim to create an inspection schedule that accommodates such times. 

Each new season provides vendors with a different set of potential presentation techniques and considerations. Autumn in no exception; through thinking about the unique aspects of the season and building your presentation strategy around such, you can put your property in a strong position to appeal to prospective buyers and secure a good selling price. 



1 comments | Posted by Charles Tarbey on 01/03/2013 at 12:00 AM | Categories: