Category Archives for "KNOW HOW"

15 steps to property success

Key Steps to YOUR Property Success

It’s time to take action. Here are 15 Steps to get you started towards Property Success.

1. Where are you now

Take a realistic look at your financial position today…

  • What assets do you have?
  • How much do you owe?
  • How much do you spend?
  • Do you have any money left over to invest?

2. Where do you want to be

Write down where you’d like to be financially in 1, 5 and 10 years.

(You need to plan for your property success)

3. Pick a Strategy

You need to work out what Property Investment strategy suits you best.

  • Do you like to renovate?
  • Do you need cash flow?
  • Does developing or subdividing properties appeal to you?

There are many different strategies so you will need to pick one that suits your personality and budget.

The strategy you choose will determine the type of properties you will be searching for.  It would be impossible to look at every piece of real estate on the market so picking a strategy will help you narrow down your search and also help you communicate what you are looking for to real estate agents and prospective vendors.

It is then important that you stick to and focus on your strategy.

4. Create a Plan of Action

Without a plan you will not go anywhere.

Write down what you want to achieve and how you plan to achieve it and by when…be specific.

(Action will lead to your property success)

5. Finding the Properties

Not only will you need to do some research to work out the areas you need to be searching for your property, but it is also important that you think about attracting the properties you seek creatively;

  • consider advertising in local papers
  • community notice boards
  • use flyers
  • give the real estate agents in the area a good outline of the type of property you are looking for
  • have the type of property on a back of a business card and perhaps offer a financial incentive to anyone who finds you a deal (and hand these out to everyone you meet in the area).

6. Network with like-minded women

Surrounding yourself with like-minded property women is an important part of your property investment journey.

There are several reasons to network with as many property investors as you can. They can act as information sources; provide inspiration; and assist you in finding deals. You might even consider going into a joint venture with someone who shares your vision.

Other property investors are easy to find if you look in the right places; obviously you’ll meet them at property investment workshops, and other Property Women events. You can also find them by going on-line and logging on to property forums. Facebook can be an option too, for example www.facebook.com/Propertywomen. It’s worthwhile attending any networking events for property investing in your area. You might even like to think about organising your own networking events by placing ads in the paper or on-line.

Visit www.propertywomen.com.au to find out about upcoming networking events we will be having in your area.

(Networking with like-minded women increases your changes of staying focussed and motivated which leads to your property success)

7. Find your Finance

The first thing you need to do is get your finances in order by getting any bad debt under control. It’s a good idea to add a mortgage broker to your investment team and establish your borrowing capacity:

  • What is your available equity?
  • How much can you borrow?
  • What value property can you buy?

(the right loan increases your changes of your property success)

8. Assemble your team

Start by getting referrals from others through your network and check out our Little Pink Book online services directory :

  • Find a Property Wise Accountant
  • Find a Property Savvy Lawyer
  • Take the time to find a good Property Manager
  • Do you need a Quantity Surveyor
  • Need a Trade or Service provider in the area

(a Good team equals property success)

9. Research

  • Choose an area to begin your research (this will depend largely on the strategy you choose, your suburb could be a good start).
  • Go to lots of Open for Inspections and Auctions.
  • Read property investor magazines.
    • Both the Australian and New Zealand Property Investor Magazines list sales and rental returns in the back of the book.
  • What to look for:
    • Location
      • Is it a good or bad street/suburb
    • Do not overlook up and coming suburbs.
    • Are surrounding houses well cared for?
    • Proximity to shops, schools, cafe’s
  • Infrastructure
    • Proximity to roads and railway/buses, hospitals
  • Type of property
    • House, townhouse, unit, block of units development site
  • Property with a twist
    • Can you turn a 2 bedroom house into a 3 bedroom house
    • Can you divide it into flats?
    • Can you turn the garage into a bedsit?
    • Can you subdivide the block / section?
    • Is it zoned for development?
  • How can you add value?
    • Paint
      • The absolute cheapest and quickest way to add value
      • Choose neutral colours
    • Revamp the kitchen and bathroom
      • It’s not always necessary to replace them
    • Replace the carpet if old and worn
    • Clean up the yard
    • Build a new fence
  • Find bargain suppliers (consider Auctions)

10. Make Offers

  • Make low offers- what have you got to lose?
    • Perhaps even between 10%-30% below asking price
  • Always buy at less than market value (which isn’t always the asking price!)
  • Be aware that sometimes the asking price is good value

11. Do your due diligence

  • Have an escape clause in place
    • Check it with your lawyer
  • Building/pest inspection
    • Is the building structurally sound
    • Problems and Pests can make you money
      • Ask for a discount for you to correct any problems

12. Add value

  • Plan your renovation during the contract period so that it can begin shortly after settlement.
  • Cosmetic Makeover
    • Budget your time
    • Allow 4 weeks for your renovation (time is money)
    • Follow a strict budget – you are not living in this house
    • Spend no more than 5% – 10% of the cost of the house on renovations
      • E.g. $200 000 house – $10 000 to $20 000 on renos (maximum)
      • If your reno is more than 10% then change your plan

13. Find good tenants

  • Thoroughly check out potential tenants
    • Can they pay?
    • Will they look after the house
    • Check out their references
  • Or find a good property manager

14. Put your equityto work!

  • Revalue the Property
    • Talk to your mortgage broker
  • Then do it all again
    • Build a multiple property portfolio over time

15. The secret to ongoing success

  • Continue to educate yourself
  • Mix with like-minded people

Summary

  1. Where are you now
  2. Where do you want to be
  3. Pick a Strategy
  4. Make an Action Plan
  5. Find Properties
  6. Network
  7. Finance
  8. Your Team
  9. Research
  10. Offers (buying)
  11. Due diligence
  12. Add Value
  13. Property Management
  14. Revalue/Refinance/Buy More
  15. Education (www.propertywomen.com.au)

Get started today!

Stage 1:

This is the getting started phase. Steps 1 to 11 could be completed within 90 days.

Stage 2:

Stage 1 will form the base for steps 12 to 15. You have researched, made offers and secured your property. You can now add value quickly. You can then rent it, revalue it and refinance it so you can do it all again and again. You are then on your way to reaching your financial goals.
If you’re committed to starting out or continuing your property education, check out the resources we have available to help you : www.propertywomen.com.au

Wishing your all the property success you dream of.

14 good reasons to invest in New Zealand

Investing in New Zealand

1. It’s a buyers market

With limited competition and lots of properties on the market the property market in New Zealand can be described as a buyers market.

2. Building consent numbers have fallen

The number of building consents for houses in March fell 8.3%.

3. New Homes are becoming more expensive

Due to the falling dollar new homes will be more expensive to build as the cost of importing construction material is increasing and a number of builders have left or are leaving the industry.

4. Investors are currently not buying rental properties

This will lead to a shortage in rental properties available and therefore will see rents increase over time.

5. Lower interest rates and tax cuts

Lower interest rates and tax cuts have made it easier then ever before to afford to purchase property in New Zealand.

6. Property prices have remained reasonably steady

Property prices have remained reasonably steady in the face of negative media and the current financial crisis.

7. Vendors are ready to negotiate on price

Vendor are ready to negotiate resulting in opportunities for investors to pick up bargains.

8. Positively-geared property deals can now be found

In most areas of New Zealand positively geared properties can now be found.

9. Prices are set to increase again

Once the confidence in the property market picks up again property prices are set to rise.

10. New Zealand’s property prices have doubled every 7 years

On average property prices have doubled every seven years for more than 50 years and there is nothing to suggest that this will change.

11. No Stamp Duty

You do not need to pay stamp duty in New Zealand.

12. No land tax

Investors do not need to pay land tax in New Zealand

13. Low entry level

Investors are able to enter the property market at the lower end as some properties are available to investors from as low as $100,000 NZD.

14. Exchange Rate

Australians are able to buy more property for their dollar due to the current exchange rate.

Finance – Making or breaking your next deal

Finance is Key

Finance is a key factor when obtaining an investment property. As an investor, you need to have the necessary information and understand all the available options to make successful decisions that suit your next purchase.

Financers don’t always understand property investing that doesn’t conform to the ‘norm.’ That’s why it’s important for you to know about all the new options available in the finance industry. Thinking outside the box could significantly impact the cash flow of your investment and determine whether you can even obtain the loan.

Since structuring your finance properly can make or break your next deal, here are a few options to consider:

Joint Ventures

Joint ventures can allow you to accelerate the growth of your property portfolio even when you have little or no more equity to use as deposits to buy property.  There’s nothing worse to an investor than finding a great deal or wanting to purchase more properties without the means to do it. If you keep running out of equity, even though you have great borrowing capacity, this strategy may be for you.

Joint ventures can be a good way to fast-track your portfolio but it’s important to choose the right partner. “Joint venture partnerships should have a common purpose, complimentary skills, and an asset base from both sides that can contribute to the project,” explains Todd O’Neill, whose career in banking and finance spans 20 years. He currently operates a business finance company, The Mardent Group, with Damian Mantini.

Joint ventures are successful when the partners have done their homework on each other and have written agreements that spell out the conditions of the partnership.

Low Doc (or Lo Doc) Loans or Lines of Credit

If you are self-employed or an independent contractor with no proof of income or a property investor that has been rejected by traditional lenders you might want to consider low doc lending. Changes in financial trends are adding to the demand for non-conforming products, such as low doc loans, which require less “documentation” than traditional loans.

These loans predominantly for clients who have difficulty documenting their finances with regular pay slips, tax returns or business financials. For example, while the self-employed often can’t satisfy traditional lending criteria, they can be perfectly capable of serving a loan.

Keep in mind, low doc home loans are usually more expensive than traditional loans due to the higher level of risk. In addition, “requirements are more stringent than in the past,” warns Mantini. An investor must demonstrate the ability to repay the loan.

Commercial Finance

Commercial property offers a wide range of exciting investment opportunities. While purchasing commercial properties, retail shops, industrial land, or offices have a higher risk; returns are often higher as well. A well-researched commercial property investment can be very lucrative and require little attention once it’s tenanted.

Commercial property finance is typically more complex than residential funding. A qualified broker can help you understand all your options and determine which loan structure is right for your needs. Normally banks will lend up to 75% of the value of the property.

Cross-Collateralization

Cross collateralization occurs when more than one property is used to secure a loan or multiple loans. It is a creative financing technique that has been used for years in commercial real estate and is currently being used by some forward-thinking property investors.

For example, if you own one property and want to purchase another without using your own funds, the bank can use both properties as collateral for the new loan. However, be aware that cross collateralization gives banks greater control over the properties and this strategy has the potential to negatively impact future investment opportunities.

These are just a few of the innovative options available in the finance industry. As useful as traditional financing strategies can be in acquiring property, don’t overlook the other options of finance that can unlock doors to wealth and prosperity.

Recent Successful Case Studies:


Tracy Kearey from the Mardent Group
has given us two recent case studies which show how a broker can help their client overcome obstacles that are stopping them getting finance.

Case Study 1:

Client purchased the property 2 years prior with vendor finance. The terms were for 2 years with the client making I/O repayments. Time was up!

Obstacles:

  1. Client’s bank would not refinance the vendor finance
  2. Client wanted to use a current valuation not the contract as she had renovated the property and wanted pull out the equity for another venture.

Solution:

I called my lenders and established that as she had repayment history on the current facility and we were looking at an 80% LVR the application would be considered.
The application was submitted and within 1 month the application was settled client had a lower repayment and funds to move onto the next venture!

Result:

Happy Client!

Scenario 2:

A self employed couple (61yo and 55yo) approached one of our brokers in order to purchase a commercial security in the name of their self managed super fund.  The purchase price of the security was $800,000 with an expected rental return of $110,000 per annum.  The loan they were seeking to complete the purchase was $500,000.  The security on offer, their unencumbered owner occupied property.  The broker shopped the loan to a couple of the major Banks and was told no it doesn’t fit their lending criteria

Obstacles:

  • The borrowers business strategy was to purchase ailing “Tint-a-Car” franchises and build them up in to profitable going concerns.  In early 2009 they sold their previous “Tint-a-Car” franchise’s for a considerable profit and purchased two new franchises.  2010 financial year was spent building up the new franchises therefore all monies earnt were put back into the operations and the business traded at a small loss.  The borrowers opted to draw from the profits of the sale rather than take a salary from the business, therefore the borrowers income was $Nil for the 2010 tax year.  In 2011 all there planning and hard work paid off with a substantial profit earnt plus directors salaries paid.
  • As the borrowers were nearing retirement age and the security being used was their owner occupied property, responsible lending concerns needed to be addressed.
  • As the property being purchased was in the SMSF rental income could not be included in servicing.
  • Average of the two financial years was not adequate to service the debt.

Solution:

  • We obtained the borrowers 2012 interim figures and BAS to March 2012 (including tax portal lodgement evidence). The figures shown in the interims and BAS exceeded the 2011 tax year.  Which meant that based on the 2011 figures supported by the current trade servicing was evident on trading income alone.
  • The value of the commercial premises being purchased exceeded the proposed funding by $300,000 plus the value of their current franchises provided us with an equitable exit strategy which meant we were able to write the loan over 30 years rather than reducing the loan term to years to retirement.
  • The borrowers entered into a loan agreement with the superannuation fund where the superfund were to pay a regular monthly payment to the borrowers.  Formal evidence of the arrangement was provided.  The repayment was adequate to cover the monthly commitment for the proposed funding.  Whilst we did not use this income in servicing it supported the proposal put forward to our funder.
  • The loan application was received by our office on 8 May 2012 and settled just 18 working day later on 31 May 2012 at a residential Profession All in One Line of Credit rate.

Result :

Happy Clients

If you’d like to get in contact with a finance broker to see how they can help you we have some great finance brokers based around the country go to Property Women’s Property Professional Network to find out more.

Maximising your rent

How Do You Determine the Best Rent For Your Property?

Every investor should be striving to get the maximum rent possible for their property; so why not just pick the rent you want to achieve and advertise it at that? That may seem the simple approach but it’s certainly not the most effective and is likely to actually reduce your overall rental income rather than increase it.

Yes it is important that you strive to get the maximum rent possible, however you also must keep in mind setting the correct market rent to get your property rented as soon as possible; the longer you have a property vacant, the more it’s going to cost you. As an investor you no doubt realise that time is money!

So how do you get the highest rent in the shortest time? Well I believe there are 3 factors to consider:

  • Demand– Is there a high or low demand for properties at present.  are there lost of adverts which have been there consistently, or do real estate agents appear to have many properties available. This can be seasonal and affected by a number of factors. If there’s high demand you are more likely to get a higher rent. If there’s low demand you could be competing with other landlords.
  • What Is Available Now– look at properties currently available for rent in the newspaper and/or the internet, and consider their location and features for comparison to yours. Have they been on the market for a while? Are they asking too high a rent? Are they lacking in facilities that you can focus on when marketing your own property?
  • What Is Rented Right Now– Compare your property with what is currently rented, taking into account property location and features. Find out by asking other local property investors or your property manager. This will give you an indication of what type of property rents more easily at what price.

These 3 key factors should give you enough information to set the right rent for your property to get your income flowing quickly.

What if I want a rent amount that is higher?

As I mentioned at the beginning of this article, you could potentially just advertise the high rental that you want to charge – you can of course place your property on the market at any rental amount you wish.

However, after reading the 3 key factors above I hope you understand that it is the market demand that sets the rent and if the market (prospective tenants looking for a rental property) deem the amount of rent too high; your property may stay vacant longer than necessary.

With this in mind, be aware your annual rental return will be reduced by 2% for every week it is vacant!

If you want to charge high than market rent, and you also want to get a tenant quickly, you need to be providing something that the other landlords are not, which is important or attractive enough to the prospective tenant for them to pay a higher rental amount.

How should the rent be reviewed?

Everything comes in 3’s and this is no exception!

  1. The ideal opportunity to review the rent is when you are looking to secure a new tenant, but always review the rent against market conditions as mentioned above.
  2. Lease renewal time is a great time to review the rent, but again, make sure you’ve done your homework if you’re self managing.
  3. Negotiating with a periodic tenant to make some improvements to the property or offer benefits to them allowing you the opportuhi8ty to review the rent, at the same time. You may even want to negotiate to change them to a fixed term lease at the same time, too.

It should be noted here also that there may be some legal limitations which apply to when you can increase the rent in your area so make sure if you self manage you have done your research on those requirements. If your property is being managed the property manager should contact you for your permission before the rent is increased.

As property managers working in the market day to day it’s easy for us to keep up to date with the market and the local legislations relating to rental properties, but if you’re self managing it may be something you only do occasionally, so keep these notes ready for your next opportunity to review your rent and make the most of your investment!

This article has been supplied by Ros Hurn, Principal at Real Tenants, Real Property Management www.realtenants.com.au Real Tenants is dedicated to providing its clients with the highest possible quality of service and standards, seeking to deliver on their promise of reliability and quality above all else.



Rent

Risks and pitfalls of investing from a legal perpective

Weighing up the Risks and Pitfalls of your investment

Avoiding or minimising the risks and pitfalls with property investment can be accomplished following these three simple rules:

  1. Obtain the right advice from the right consultants.
  2. Obtain the right advice early.
  3. Be commercial and follow through with the advice.

Without obtaining the right advice upfront before you enter into any contract or agreement the consequences can be fatal, regardless of the size of the property small or large.

Here are some common pitfalls and traps people may fall into when investing in property:

  • Signing an agreement without obtaining advice – BIG MISTAKE. Even the smallest of investment properties can cost you thousands of dollars down the track in unwanted legal fees and potentially, payment of damages and penalty interest if no advice or the wrong advice is received;
  • Incorrect purchasing entity – if you obtain the right advice upfront before you sign this should lead you to ensuring the right legal entity is purchasing the property and is noted on the contract accordingly;
  • No conditions – every transaction is unique, therefore almost always there are some form of conditions required for both seller and buyer. The type of deal you are wanting to enter into must be discussed upfront and conditions included to favour and protect you, whether as buyer or seller;
  • Incorrect conditions – this is sometimes worse than having no conditions. What is the point;
  • Ambiguous conditions – if the conditions are ambiguous how can each party interpret what they mean. The conditions need to be clear and simple but effective;
  • Deposit details –these must be clear as to the amount, when payable and how. Methos of payment can vary. In long terms deals the deposit is usually invested.

Liability limited by a scheme approved under professional standards legislation. Who is entitled to the interest when the deal is completed would need to be accounted for;

  • Type of agreement and structure – getting the right agreement and structure for your investment is paramount. Obtaining the right taxation advice is critical;
  • Stamp duty considerations – very important. You do not want to paying out more money in government taxes than you have to;
  • GST considerations – important and often missed or not discussed. The sale and purchase of property can have GST consequences and a buyer may be misled as to whether a purchase price is inclusive or exclusive of GST;
  • Legal & accountancy advice – always obtain the right legal and taxation advice upfront before you sign and commit to the terms of the deal.

If you obtain the right advice upfront you should be able to avoid or minimise most if not all of the above issues. Getting no advice, or getting the wrong advice from the wrong consultants or professionals can be materially damaging to you reaching your end goal, and in some cases, can have detrimental and costly legal consequences for you.

This article has been provided by Despina Priala from Priala Legal

 

How is the Market?

A Real Estate Agents Perspective

christine_stow_edited

As a Real Estate Agent, I am always asked:  “How is the Market?”  Right now it is a great market and it is a great time to buy.

If the media reports that the market has gone down 20% or 40% then consider this: your dollar will buy more house.  A home worth $500,000 before, should now be selling for $420,000.  If it was $1,000,000, you will now buy it for $900,000.

My name is Christine Stow and my aim is to provide you with an agents perspective so you can be better prepared as a buyer or seller.  I am an investor, a home owner, a renovator and a mum: so I am well equipped to understand how it is for YOU.

Fact or Fiction

Although the headlines say the housing market is slow, it should not substitute for hard facts and figures.  RP Data quotes that housing prices in Melbourne this year have gone down only 0.1%.  That is, on your $500,000 house it has reduced in price only $500.  In fact in many areas including the one I work in, there has not been a fall in prices and I have seen some areas increase in median value.  You can go to RP Data (http://rpdata.net.au) to get FREE suburb profile reports.  This will give you a breakdown of the types of people living in the area, their income, parks and amenities.  Even if you live in the suburb, it is a good idea to get this information, as it lays out everything in black and white.  For example, you can look at the pie chart of how many people rent in the area.  If you are buying an investment, you should aim for at least 30% renters, as this gives you a big enough rental population to keep your place tenanted.

Find a Good Agent

A good agent will give you information on comparative sales in the area.  If they are not readily available, go to RP Data.  You can buy more detailed reports if you are really keen on the area.  It is worth doing research for yourself.  It costs money but it can cost you more in the long run if you don’t do it.

It is important when building a relationship with the agent to be a credible purchaser.  When the agent asks what you are looking for, don’t answer with “I’m looking for a bargain”.  Be specific, for example, “I’m looking for a 3 bedroom weatherboard and tile in the suburb of xxxx that’s suitable for renovation.  If it has extra land at the rear I’d also be interested.”

The agent will know valuable information such as how long the property has been on the market, the reason for selling and the level of motivation of the vendor.

The Role of the Agent

Remember that the agent is working for the vendor, but without a buyer he/she received no commission.   It is the agent’s role to bring together a vendor with a set of price expectations and a buyer with different expectations to meet in the middle and agree and effect a sale.  If you have built a relationship with the agent, you will be much more comfortable when it comes to negotiating for the property.

When buying, it is worth putting an offer in writing once you have done your research.  I have seen properties where most people wouldn’t make an offer no matter how many times they were invited to.  The first person who did put in an offer, even though it was very low, had their offer accepted. You never know what an offer in writing might do.  Remember; it is the market that determines the price of housing, not the agent and not the vendor.

You can ask questions of the agent, but the answers should not substitute for a builder’s inspection report.  Get a qualified builder to inspect your prospective purchase.  The information should not determine whether you purchase or not, but rather the best price you should pay.  If a home needs work, chances are there are not too many buyers competing for it.  Most people don’t like the work.

I am happy to answer any questions on how to buy or what to look for in an agent where ever I can help make the process easier.  I have previously attended a Property Women Workshop and have formed a spin off group: “Melbourne Women in Property”.  We meet regularly to provide networking opportunities, information and tips.  I call it a “support group for renovators, investors and home buyers.”  We have some husbands attend and we don’t ask them to wear a dress anymore.

Christine Stow  works at LJ Hooker, at the Greensborough Office in Melbourne.  You can contact her directly at christinestow@bigpond.com.au or call on 0439 385 217.

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