Tag Archives: property investing

Is it time to hire a property investment advisor?

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The most successful people know that to achieve their goals, they must have a strategy in place. Being a landlord is no exception. If you want to achieve your investing goals, whether that’s owning one property or 5, start with the big picture plan and break it down into annual, monthly and weekly tasks.

If you are new to property investing, you may need to connect with an expert and employ the services of a property investment strategist to help you.

A good property investment advisor will be unbiased. They will not be trying to sell you something. They will give you honest feedback, and develop a strategy that is aligned with your financial goals, your risk profile and also aligned with your current bank balance.

Here are a few things to think about that will help you determine who will be the best fit for your needs.

Most advisors probably have their own investments so start by asking them about their track record. Find out when and how they started, what they like to invest in, how many properties they own, what mistakes they made etc. Finding out this information should provide you confidence and encouragement about their abilities.

Having their own investments is not essential, however. Regardless of whether they do this for themselves, you’ll want to see testimonials of other clients they have helped. Do your research and find out what other people have to say about them.

Investment techniques change over time as markets change. Find out how they recommend structuring investments and the techniques they use for maximising equity and cash flow for their clients.

Hiring an advisor is a big step in your investing success. What tips do you have when choosing the person who is the right fit for your unique situation?

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Invest in your future and buy a rental property this summer

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Will you be taking time out and hitting the beach this summer? The real estate market slows down over New Years so if you are looking to purchase a rental, this could be your opportunity to find a great bargain. If you don’t own and investment property yet, it’s easy to get overwhelmed with so much information out there.

Here are a few points to consider:

What’s your financial situation?

What have you saved for a deposit? What about other sources of money? Make sure that you have at least 10%, and some banks will want more. They also want to know where you work and will love to see that you have a secure job.

If you are relying on a First Home Owner Grant (FHOG), remember that more often than not they are designed for properties that you intend to live in rather than investment properties.

Do your research

What do you know about being a landlord? Do you have an investment strategy and are you clued up on how to evaluate a property to see if it will be a good fit for you? If not, then start talking to people and finding out everything you can about it.

No one does this alone

Outsourcing and delegating are probably the most important you’ll learn. You need a lot of people around you to make a successful landlord – Lawyers, building inspectors, buyers agent, financial planner, a property investment adviser, finance team, etc. Build your team and start putting offers in on properties.

Take the first step

You can have all the knowledge in the world, but it’s worthless if you don’t take action on it. Buying a house is a big deal, whether it’s your first or fifth one and you might experience ‘analysis paralysis’ at some point. You spend all your time researching but don’t have the confidence to take the plunge and do it. This is when your team will help you take that first step.

Are you going to invest in your future while everyone else is at the beach this summer?

How to snag a deal when it comes to investing in property

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One essential element to being a successful property investor is getting to the property before the competition and snagging it for under market value.

But how do you do that?

It all comes down to planning.

Research and Planning

You need to do lots and lots of research! The numbers don’t lie, and you need to have accurate historical data to make informed decisions. Some areas you need to cover include:

Median price in the suburb that you are investigating – past 12 months, five years and ten years
Track property sales in the targeted suburb. Which ones are going to auction, which is being passed on. Ask for price guides from agents. (Keep a closer eye on comparable properties)
When you are viewing a property, find out what it last sold for, when and how long it stayed on the market.

 

Consider a buyer’s agent

A buyer’s agent is on your side. They are trying to get the best deal, and they take the emotion out of it all. Send the agent to auctions to ensure you don’t get caught up in the excitement and go over-budget. Buyer’s agents are experts in the areas you’re looking at, and from their experience, they will be able to give you a general idea of what a property is worth.

 

Make an offer

Sometimes you might want to put in an offer before a property goes to auction (if that is where it’s going). Some vendors may want to skip the auction stress altogether and jump on your offer. Have a good negotiation strategy – not offering your top dollar first off is a good move.

 

Know when to walk away

There is always going to be another property around the corner. So if you miss out on one because it’s more than what you can afford, don’t worry another one is on its way. Plus, you never know, the vendor may not be able to sell it for their asking price and may get back in touch.

Bargains aren’t easy to find but they’re definitely out there. Have you snagged any good deals lately? Let us know in the comments.

How much money does your tenant make?

True Property - how much money does your tenant make

When screening potential tenants, one thing you need to find out is the ratio of their income to the rent they will be paying you.

If the rate is too high, you run the risk of your tenants going through a bad patch, then not being able to pay you. On the other end of the scale is if it’s too low, you might struggle to attract your ideal tenant. Tenants with a high income may have higher expectations.

The standard approach of the ratio is 30%. 30% of your tenant’s income would go to rent, leaving 70% for the tenant to live and play.

What happens if you slide it one way or the other? If you want rent to be 20% of your tenant’s income, then your property needs to reflect that. You would be attracting high-level professionals, and it’s likely that they will be looking for high-end features. If this is the case, do the numbers still add up on your end? Are you making the profit that you would be if you the ratio were 30%?

What about if you slide the scale, so the ratio is 40% or even 50% of a tenant’s income? You will have a tenant who may struggle to pay the rent on occasion – are you prepared for that?

Tenants (hopefully) will have an idea of what rent they are comfortable paying, which will factor in any emergencies.But it’s your responsibility to double-check during the application process.

Undertaking your due diligence and choosing the right tenant is the key to enjoying being a landlord. Are they responsible? Are they likely to stay for a good long time? Can they afford to live on your property? The rent to income ratio is one of the key factors to look for when you are choosing the right tenant. It’s important then to make sure you feel comfortable with whatever percentage you come up with. But no matter what percentage you want, have a plan in place, so you know what to do if your tenants are demanding more features, or they are not paying the rent.

If you would like help deciding on the ratio for your property, get in contact with us, we’re happy to help.

 

Property Investment Terminology Explained

True Property - Property Investment Terminonology Explained

Every industry has their jargon and unique terminology and property investing is no exception. Taking the time to learn all the words and acronyms will make life easier for you when you are negotiating and running your rental property business.

The list below is not complete by any means, but here are a few of the most common terms to get you started. How many do you already know? What other essentials do you recommend adding to the list?

AARP – Annualised Average Percentage rate. Sometimes referred to as the comparison rate and takes into account all the costs associated with a loan, and is also used to compare loans

Appraisals or Valuations – Is a written report of the estimated value of a property

Appreciation – This is an increase in the value of the property (or another asset).

Body corporate – This an administrative body which is made up of all the owners within a group of units or apartments of a strata building.

Bridging finance – This is a short-term loan intended to bridge the gap between buying a new property and selling an existing one.

Capital gain – This is the amount by which your property has increased in value compared to what you originally paid for it. For example, if you bought a property for $50,000, 20-years ago, and it is now worth $650,000 you have made a capital gain of $600,000.

CGT (capital gains tax) – If you sell a property that has increased in value, this is the tax that you pay on the profit. Using the example above, you would be paying tax on the $600,000 you made.

Cooling-off period – This is where the purchaser has a period to withdraw legally from the purchasing of the property. Each territory is different on the time frame offered so check the requirements for your area.

Cross-securitisation/cross-collateralisation – Using one of your properties as security for another property.

Default – Failure to pay a debt by the due date.

Depreciation – This is the decrease in value of an item (e.g., a building) over time. You need to declare your depreciation on your taxes each year.

Equity – This is the difference between your mortgage and your property’s value.

LMI (lenders mortgage insurance) – If you are borrowing more than 80% of the property’s value, the lender will usually require you to take out this insurance in case you default on the loan.

LOC (line of credit) – Similar to a credit card. It is money available to you to use at any time.

Low-doc loans – This is a loan that does not require as much documentation as a traditional loan. This is an attractive option for the self-employed.

LVR (loan-to-value) ratio – To calculate the ratio divide your loan amount by the value of the intended property. Multiply the figure by 100 to get a percentage. This ratio is used to see if you can truly afford the loan.

Median – The median house price is the middle price of ALL sales recorded in a particular suburb, postcode, city or state.

Negatively geared – The opposite of a positively geared property (see below). This refers to where you are spending more money on the property than you are currently getting out of the property. The benefits are that you can offset the costs against your taxes. This is a good option for high-income earners.

O&A (offer and acceptance) Form – This is the form you sign when putting an offer on a property. When the owner accepts and signs this form, it then becomes a binding contract.

Portfolio (as in property portfolio) – The is the number and type of investment properties you own. The greater the portfolio, the bigger the profit (but not always).

Positively geared – When the income you receive from the property is more than ALL the costs involved in owning the property.

PPOR or PPR – Your principal place of residence.

Principal and interest – This is the amount that was borrowed and still has to be repaid, plus the interest on the mortgage. The Principal is the portion that reduces the balance of the mortgage.

Property cycle – Property follows a period, where there is a Growth phase, a Slowdown phase, a Bust and then an Upturn. The cycle repeats every 7-10 years.

Refinance – This is the term used when you obtain additional funds usually used to pay off an old loan, by using a new (and cheaper) loan.

Rental yields (and calculations) – This is the return on investment as a percentage of the amount that you invested into the property. Multiply the weekly rent by 52 weeks in the year. Then divide that by the value of the building. Finally, multiply that figure by 100 to get a percentage.

Serviceability – Based on your income and expenses – can you make the mortgage repayments?

Stamp duty – The state government tax on the transfer of property. This is calculated based on the value of the property.

Strata title – Also known as a unit title. This title grants you ownership of a section or a ‘unit’ of a larger building.

Supply and demand – An economic term that defines the market. Determined by the amount of property that is available for sale and the number of buyers in the market. If there are a lot of properties available to purchase it is a ‘buyers’ market’ if there are a lot of buyers then, it’s a ‘sellers’ market’.

Vacancy rates – This is the measure of how many dwellings are available to rent for a specified period. If there is a low vacancy rate, it means there are not many properties available to rent which is the ideal situation for a property investor.

Vendor’s terms/Wrap – This refers to when a property owner is prepared to offer a buyer finance or other assistance to the purchaser. These may include staged payments to assist with the purchase of the building (also known as ‘wrapping’).

Yield – This is the return to an investor on investment. It is the percentage of the amount invested.

Please contact us if you need more help understanding investment property language.

How to raise your rent and increase your profits today

True Property - how to raise your rent and increaes your profits
Recently, we talked about how to set the rent on your new rental. Many landlords have no idea what’s the right amount to charge and often charge too little or too much. Once you have been in the game for a while and your tenants are happy and settled, you may be thinking about raising your rent.

The easy way to do this would be to increase it when your current tenant moves out and before the new one moves in. Many landlords believe this is the only time you can increase your rent – but this is not the case. If you handle it delicately, you won’t lose your tenants and you will be increasing your profits. It can be a daunting task for some landlords as they are afraid their tenants will move out. However, if you want to increase your profits, it has to be done.

What are your expenses?

Look at the expenses for your property to see if they exceed your income. They will increase over time so it pays to look at this over the whole year. If the tenant asks for reasons why rent is increasing, you will able to paint them a clear picture.

How much should you raise it by?

It is best to try to keep the rent increase under 10% otherwise tenants will probably leave. It also pays to look at similar properties to see what they are charging and keep it in line with what the market rates are.

Is it in your lease agreement?

If possible when tenants move in, verbally warn them that rental increases can and are likely to occur over time. You should already have this in writing in your tenancy agreement with the tenants, so this should not be a surprise. Legally you have to give 60 days notice, but depending on your relationship with your tenants, providing a bit more may be the courteous thing to do. It also allows you to find new tenants if they decide to move out.

Do you have any tips on how to increase the rents on your properties?

How to be an awesome landlord so tenants are desperate to rent from you

True Property - How to be an awesome landlord so tenants are desperate to rent from you

Did you realise that as soon as you get your first tenant, you are officially a business owner? Many people don’t make that connection and view their rental business as a hobby or maybe a retirement plan.

When you change your mindset and start treating your business as a business, you will find greater success. To be great in business, you must focus on relationship building before profits.

Here are 3 tips to be that awesome landlord everyone wants to rent from.

1. Always screen tenants

Start as you mean to go on and only rent to the best of the best. If you property is in good condition and in an attractive area, you will never be short of tenants wanting to live there. The trick is to have a strict screening process in place so you can weed out unsuitable people. Have a clear idea of who you want to rent from you and adhere to those conditions. Always check their references and ensure they haven’t had any recent evictions and always pay on time.

2. Look after your tenants when they move in

When you find the perfect tenant, look after them. Present them with a welcome pack when they move in and stay in contact with them without being overbearing. This is your business, so treat your clients with respect and they will be loyal for many years to come.

In the welcome pack you give your tenants, include a list of your rules. They can’t follow the rules if they don’t know what they are. Be clear about your expectations from the start.

Always show compassion to your tenants without letting them take advantage of you. If they are a day late on the rent, be considerate and take the circumstances into account. If they are late on the rent every single month, then you need to take action.

3. Keep up with maintenance

When you keep up with your end of the bargain, your tenants will keep up with theirs. Keeping up with maintenance and responding to their requests in a timely manner will ensure they will look after the place as well. If the repairs aren’t an emergency situation, always arrange a convenient time to come and inspect the problem. Your tenants will love it if you respect them and their time and don’t just stop in unannounced.

What ONE thing have you done lately to ensure your rental business runs smoothly?