Will a granny flat add value to my property?

If you have a large property and looking to make some extra money with it, you may consider building a granny flat. It is important to consider all the facts and to do your research before building.

Know the laws of your State

If you live in Victoria, South Australia or Queensland it is actually illegal to rent out a granny flat. In these states the granny flat is usually occupied by the homeowner’s adult children or elderly parent – or kept for visitors. People living in New South Wales, Tasmania, or Northern Territory though, can rent it out for extra money.

If you decide you want a granny flat, you then have to check the building regulations of your area. There are different types of granny flats to consider – a completely separate  freestanding unit, an extension on the original house or garage or you can even convert an unused bedroom. As long as it has a separate entrance, it can be classed as a granny flat.

Lifestyle vs Investment

A lot of people may be more interested in the lifestyle of having a granny flat rather than as an investment. If you are considering building a granny flat on your property, when you come to sell it, you could be limited by potential buyers interested. And if you are wanting to rent it out, you have to be selective on who you rent it to. If you are going to be living in the main house, you have to get on with your tenants as they will technically be living in your space. Most people will prefer to keep the flat as a convenient place to put visitors or as a self-contained home office.

Will it add value?

Many experts agree that it doesn’t really add value to the property. If you have to build or convert an existing space , you probably won’t make much money on it, compared to what you spend on it. It really depends on the property and the location. If it doesn’t take up too much space in the garden, you could at least make your money back, but probably not much more than that.

What do you think? Is a granny flat a good idea or waste of space?

Should I invest my money in property?

Whether you have been saving for a while or maybe you won the lotto, either way you want to be smart with your money and invest it for future use. With so many investment plans around it can be hard to know exactly what is the best option for you.

If you do you research, you can invest your money in a variety of different portfolios such as buying shares (Apple or Microsoft anyone?) or stocks and bonds. However, these options are considered high-risk and not suitable for most people. If you are investing as part of your retirement fund, or to save money for your children’s education you may want something more long-term. This is where investing in real estate could be a perfect match.

Investing in property is considered by many as one of the safest and easiest options when it comes to investing. The value of your property will, except on rare occasions, increase over time. Even if you purchase the worst house in the area you will make money on your investment. Of course it is a good idea to research and plan thoroughly when making the decision on where to buy because buying in a great neighbourhood will guarantee your investment will be successful – not only in increased capital gain but also in high rent you will be able to collect.

Buying an investment property is not a get-rich quick scheme, so it is probably not the right fit for you if you need money quickly. It may be years, if not decades before you will see any returns on your investment. The returns you will get from property investment will come from rental income that tenants pay, and from any increase value of the property over time. This is why most people buy investment properties to make a long-term profit. If you need money for some reason, you can sell the house but it could take a while and the process is not as fast as it is to sell other investments such as shares.

Another reason people may think twice about investing in real estate is they may spend a lot of time looking for suitable properties to buy, finding and managing tenants, and arranging for maintenance work to be done. Don’t let this put you off as there are many great Property Managers out there who will take all the stress away from you.

Contact us today if you would like more information about how a Property Manager can help you.

Can I buy an investment property if I don’t have any money?

Lack of funds is probably the biggest factor preventing hopeful property investors from entering the market. However, there are ways you can get on the investment property ladder without any money.

Property investment is a fantastic way to make money – once you get started. It usually requires some initial capital, but it is not impossible without it. Although lenders may view you as a high-risk borrower, there are ways around it.

Start Saving

Start saving straight away. Put as much away  as you can in a savings account and try to save at least 10% as a deposit. Showing you having regular payments into your savings account will prove to the bank or lender that you are capable of saving and will increase your chances of being approved.

Look at Current Equity

If you already own the home you live in, you may be able to tap into the equity of that home to fund your investment property. By drawing upon the equity in your existing home, you can buy into your first investment property with a smaller mortgage, and in the eyes of your lender you will have reduced your risk as a borrower.

Investigate Joint Ventures

It is better to own 50% of something than 100% of nothing. Consider investing with a friend or family member to get on the property ladder. It is important to get a co-ownership agreement drawn up to avoid disputes between co-owners. Consider things like setting up a sinking fund to cover repairs and periods when the property is vacant, a plan to pay for unforeseen maintenance costs and how insurance issues will be handled.

Save someone else

Another way to get on the property ladder can be to use your saved deposit to solve someone’s problem in exchange for a portion or the whole of a property.  For example, if someone is in trouble paying their current mortgage, if they sell the property now, they are not going to have much money left or even run the risk of losing money. If you offer them a sum to pay for their outstanding debt and take over their mortgage, you could get your hand on a property that otherwise will be out of your reach. This method, although not ideal, allows you to have the control but not ownership, and enjoy all the financial benefit of an investment property.

What other tips can you recommend to help a person get on the property ladder with limited funds?

 

Is it a good idea to buy an investment property in another city?

As with anything, you need to do your research when it comes to property investment. You first need to determine how much you want to spend and which locations meet your budget. You may prefer to buy in the same area as where you currently live but with property prices rising it may not be possible.

Don’t let lack of funds put you off investing. If the area where you are is expensive you may want to consider cheaper options, such as another suburb, city or state. If you are working in the city, it may be worth it to rent close to work and buy out-of-town – just to get on the property ladder. Either way, it is important to do your research and make an informed decision.

Know the local market

Regardless where you are buying your investment property, you need to know the local market well. Take time to speak to real estate agents locally and try to get as much information about the area as possible. While you can do the bulk of your research online and buy phone, you must also go and visit the area where you want to buy and look around. You will get a better feeling for the place and see if it is somewhere you actually want to buy.

Hire a property manager

Once you have made a decision on the location you want to buy in, it’s time to call in the big guns. Local property managers will help you to find out which suburbs appeal to both you and the local tenant. They will also know the type of tenants you will expect to find in the area you are looking. It is crucial to build a network of professionals to help you and a property manager will be your first point of contact. Once you have a property manager, they will oversee everything and can recommend what you need to make your investment profitable.

If you have been putting off investing in property because you can’t afford to buy where you live, there are other options. Consider buying in another city or state and then have a property manager manage it for you.

What is holding you back from buying an investment property?

Have you always wanted to buy an investment property but are not sure where to start? Are you waiting to pay off your mortgage first or perhaps you are waiting for your kids to grow up and leave home? What is really holding you back?

Fear of Failure

Everyone has fear but you shouldn’t let that hold you back. While it could be a potentially expensive mistake, by surrounding yourself with the best people to advise and help you, you really can’t go wrong. If you are worried about running out of money in unforeseen circumstances, always build a few months of buffer room into any investment plan.

Start saving

Maybe it is not fear holding you back, but lack of funds. This is where budgeting is crucial. Decide how much you are willing to spend on a property and find out what deposit you want to put down. Saving often means going without some creature comforts for a while but it will be worth it when you can finally purchase an investment property.

Fear of the Property Market

Perhaps you are worried you won’t make your money back if you invest in property. While it is true the market fluctuates up and down all the time, if you invest in a good area with a low crime rate unemployment and few foreclosures you will see your investment come back to you many times over. By investing in a good area, you will always have a steady stream of potential tenants available so you will minimise the possibility of vacancies.

Get Outside your Comfort Zone

If we all stayed within our comfort zone, no one would ever achieve anything. Sometimes you just have to make an informed decision and take the plunge. You can start small and go from there. You don’t have to buy the whole neighbourhood right off the bat. Just buy one small investment property to rent out and see how it sits with you. You will more than likely fall in love with it and get hooked, and then you can work on buying the whole neighbourhood!

If you already have an investment property, what was your biggest fear before taking the plunge? If you are just getting started, what is holding you back?

 

 

Should I invest in property with a friend?

If you are thinking of getting on the property ladder but are still not ready to take the plunge yet, it may be worth it to consider investing with a friend or family member. Let’s look at some of the pros and cons of investing with another person.

Pros

• Your Deposit

When you invest with a friend you can each save half of the money (or less if you invest with a group of friends) for the deposit.  This can help you buy a place much sooner than you would otherwise be able to.

• Your Expenses

Buying a house is not cheap, and neither are the monthly payments and expenses. Once you have saved all of your money for the deposit, you still have to pay for maintenance, rates, and your mortgage repayments. By sharing with a friend or family member, you don’t have to take on all that stress yourself. This could be especially beneficial if you plan to do some renovations before renting it out.

• Home Equity Gain
  
  Depending on what your goals are, you and your friend may not own property together forever. If you eventually, one day down the road, decide to go your own way you can sell up and split the proceeds. Compared to renting, where you give your notice and move out, if you have been smart with your investment, you will more than likely sell up (or one partner may buy the other out) and take your profits to put a down payment on a new property.

Cons

• Disagreements

The number one factor that may put people off investing with their friends is the possibility of disagreements. Most people have arguments now and again but, depending on the nature of your friendship, it depends whether you can put your friendship aside when it comes to business decisions. It could be that one partner wants to spend more money on the property  than the other, or even arranging maintenance or repairs without first discussing it. When going into a business partnership with anyone, family or friend or even a business acquaintance, it is always a good idea to draw up the necessary contracts and agreements so both parties are aware of who is responsible for what and what and what to do when conflicts arise.

• Everyone is liable

When you have a joint mortgage, everyone is responsible. You may always make your payments every month but if your friend is not good with money, they may fall behind leaving you liable for the payments. The key here is to have good communication lines open at all times and to be upfront about any possible cash-flow problems.

Would you ever invest with a friend?

Don’t let your emotions get in the way of buying/selling property

As with anything, there is always emotions and feelings involved in buying and selling property. Whether you are selling your family home where you have lived for many years or an investment property, you may still feel sad to let it go and question whether you are making the right decision.

Sellers Emotions

Potential buyers i.e strangers will come around and look through all your cupboards and criticise a place that could have quite a lot of sentimental value to you. When you decide to sell, you have to put on your businessman (or woman) hat  and look at it from a financial perspective. Remember the reasons why you are selling and leave your emotions at the door. It is a good idea to leave the open homes to the real estate agent (if you are using one) and not be present when buyers are looking through.

Buyers beware

Buyers also feel emotional too. They may be worried about taking on more debt,  and they want the property to be perfect so they may be picky about everything. But buyers, you must also leave your emotions behind when looking for a new property. Don’t get caught up in the moment and spend more money than you can afford because you find your dream home.

Investing is a business transaction

Buying an investment property is a bit different from buying a place for you to live in. You can focus more on the business side of things and see it purely as a financial transaction. You can look at the property with an objective mind and see if it really is worth what you are paying for it.

How do you feel when buying or selling a home? Do you feel differently if you are buying your own home or buying for investment?

 

How to get started with property investment

Are you thinking of getting into property investment? Maybe you already own your own home and want to grow your assets or maybe you are a young person still living at home but want to invest your hard-earned cash into something to something long-term.

What do you have to think about before you even consider investing?

How much do you want to spend?

Before investing in property it’s vital to have a thorough understanding of your cash flow. Make an appointment with your bank, so you know how much you’re able to borrow before you start hunting for properties. It is better to get the loan approved before you start looking so you don’t waste weeks or months of your time searching for the perfect place only to have your loan denied.

Don’t forget about expenses

Make sure you save for rates, insurance and repairs. When you buy your property, do what you can to prevent costly maintenance issues arising such as repairing things straight away when they are minor instead of leaving it until it becomes a big problem.

Do some DIY

Paying contractors to do renovations is expensive. You can save money and increase your profit margin if you can do at least some of the work yourself. If you have any friends or family who are handy with a hammer, get them over to help out.

Be Practical

Remember a rental property only has to be clean and functional. Don’t get distracted and buy a property because it has a stylish interior. It can be very easy to get caught up in emotions. While a home on a steep block may have a stunning view, it could be a nightmare to renovate.

Get a building inspection

Before signing a purchase contract, take the time to understand the building report to avoid expensive repairs down the track. Termites are one potential problem to watch out for.

What other things do first-timers need to be aware of when it comes to investing?

Buying a Property at an Auction

When you want to buy a property, whether it is your first time or if you are a seasoned expert, it is always a good idea to check out local auctions to try to snag a great deal. Here are 3 tips to being successful at an auction.

1. Do Your Research

Always research the market and talk to Real Estate Agents to ensure you go into an auction fully informed. It won’t hurt to look online as well. You can also attend other auctions to see how they operate. Always get independent, expert help on legal, finance and building matters.

2. Know the Rules

Auctions have very strict rules so read through them beforehand. In Victoria, the auction rules must be displayed at least 30 mins before the start. The auctioneer must tell bidders that the auction will be conducted according to the auction rules and regulations. It is illegal to make a false bid, hinder another bidder, or in any way intentionally disrupt an auction.  You can be fined if you are caught doing any of these things.

3.  Watch your limit

When at an auction it can be easy to get caught up in the moment and the excitement of bidding. Before you start, have a really clear idea of what your limit is and don’t go over that.  Auctioneers are trained to try to get the best price possible so may encourage bidders to compete.

Check out Consumer Affairs Victoria for more information.

Have you ever bought a property at an auction? Did you snag a bargain or get caught up in the moment and pay too much just so you could win?

You need to build your property investing team.

If you are going to be successful in property investing over the long-haul, you need a team of very smart people around you. There is no way you can do everything yourself. You might be able to get away with doing some things, but I challenge you to tell me you can do EVERYTHING when it comes to investing in property. Even the expert property investors knows that you can’t know everything about everything.

So who should be on your team? A mortgage broker, an accountant, a property manager, a solicitor and most also have a buyers agent.

So how do you find these people? How do you know they will be the right fit for your needs?

1 – Referrals. Always the best way to find someone who is already vetted. Asking friends, families and colleagues – people who have already done what you want to do, and have already got their team in place. That way you know the potential ‘team member’ is worthy of a phone call.

2 – Ask your team. So you have a great accountant, maybe they know of a good mortgage broker? I bet if you have a mortgage broker they will know some great property managers. We all work together so if you already have one in place, ask if they know other people who could work in the team.

3 – Professional referrals. Ask the professional bodies who they would recommend. Tell the organisation what you are after and the type of work you are hoping the team member will do and the professional body should be able to point you in the right direction.

4 – Now review.  Now that you have some names on the list, you need to make a short list. Once you have a few names then do a little of your own research – via Google.

5 – Interview. The only way you are going to know if they are the right fit for you is by asking them questions. Find out how supportive they are especially if you are new to the game. Don’t be discouraged if you realise that they aren’t going to work. At least it’s best to find out now, rather than later.

6 – Review. Once you have your team in place, keep an impartial eye on them. Have a look at them once or twice a year to see if they still fit with your requirements. As you grow, can your team come with you – do they have the skills?

Building your property investing team is critical if you want to grow  a large investment portfolio. Do you have a team or do you do it all yourself?