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Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

Things you should consider using when Purchasing Investment Properties

Tuesday, September 09, 2014

The sale of a property within Australia will be conditional upon the execution of a building and pest report.

Not only does this protect the investor by making sure the property is structurally sound, but it also protects the lending institution, ensuring they do not loan money on a home that is possibly in structurally defected.

Even new properties can have serious building and pest issues, especially if the materials used were inappropriate for the construction, but used as a cost cutting mechanism by a shady developer.

Older properties inevitably have several possible problems that the buyer should be aware of from the outset.

Before you make an offer on a property, you need to have appointed a trusted and qualified building and pest inspector.

Why?

Because once you sign a contract on a home you usually only have 14 days before you are expected to go unconditional with the sale.

The building and pest inspector will report on the quality and condition of the property in question if the property is found to be extremely poor quality or perhaps has an invasion of white ants you will be glad, as a buyer, that your purchase was conditional upon a satisfying report from your building inspection.

A poor report can basically get you out of a sale that would be a poor investment decision within your portfolio.

Insurance will be one of your best pieces of ammunition in managing risk and protecting your assets.
An insurance broker will assist real estate investors to find the best-suited insurance product to cover them for liability.

There are literally hundreds of different insurance packages out there, and finding the right one at the right price to suit your requirements takes more effort than its worth.

If you let an insurance broker do the ground work for you, not only will they have a better understanding of your insurance needs and the players within the industry that can provide them, they will also save you time and will not cost you a cent.

The commission fees charged by insurance brokers come from the insurance underwriters, not the insurance customers this is very good news!

An insurance broker will be an incredibly useful member of your real estate expert team.

The Importance of a Property Coach in Property Investing

Friday, August 22, 2014

property coach


Investment Property Coach


“Discover why most property investors fail – and what to do about it”


Why Do I need an Investment Property Coach?


This is very simple.


Most ‘wanna-be’ property investors fail because they fail to ‘act’. They really, really want to do something but they just don’t know where to begin. They start researching and get even more overwhelmed – there is so much out there! Many people then suffer from ‘paralysis of analyses’.

They get so caught up trying to pin-point the best time to buy, the best location to buy in, and the best type of property to buy. In the end they simply DON’T buy.


investment propety coach


Many people want to research and research until they are absolutely, 100%, without-any-doubt sure that they are entirely correct and certain of their decision. If they wait till then they will simply never buy. As an experienced property investor I know you can never be 100% sure you have got it right. Even the most experienced investors get the 'D-Day’ (exchange and settlement day) jitters. It is human nature to have fear and doubts.

Other people want to do it but just can’t work out how to put aside that extra $2 a day. And I am serious, that’s all it costs at the moment to buy a property (depending on your tax bracket and the type of property you buy).

Others are just not sure whether they should invest first or buy their ‘white picket-fenced’ house for the Golden Retriever and the kids and invest later. Others simply think, “I can’t do it. It would be too hard for me.”


So what’s the answer?


Get a coach!

“What?” you say, “What’s therapy have to do with investing?” Well, a lot actually.


What is a property coach?


An investment property coach can help you determine things like:


What is your definition of success?

1.           Are you there yet?

2.            What do you really want to achieve in life?


A coach can give you the support and encouragement you need to achieve your goals. They are someone who is on your side, objective and ready to assist with any blocks or challenges you may face along the way. A coach will provide guidance and help inspire you to design your financial and life journey. They will celebrate the good times with you and provide encouragement during the challenges. They can teach you to how to examine your financial beliefs and values, trust your instincts and build your excitement to be the best that you know you can be.


A coach will help you:

•       find out where you are at right now

•       look at alternative options should anything not be working for you

•       put into place the new actions to help you reach your desired destination


RIGHT INFORMATION + RIGHT MOTIVATION = all you need for SUCCESS.


Subscribe to investment property coach Catherine Smith:



For More Investment Propety Advice check out the video below


Why Property Managers are Worth Using when Purchasing Property

Friday, August 08, 2014

 

Why Property Managers are Worth Using when Purchasing Property

“It’s crucial that your investment property is well-managed and that you choose a good property manager. Effective property management is the key to protecting your asset. Remember, it’s not just a property, it’s a significant investment and you want it well looked after. You want its value to remain high and you want the best rental return on your investment.”

 Some landlords try to manage their investment property themselves. Sometimes this works OK. However, there can be many pitfalls. We have found from our experience that a good property manager is worth their weight in gold in looking after our investment and saving us hassle.

A good property manager will excel in the following:

Marketing

– Marketing your investment properly to get the maximum exposure to the right kinds of tenants. Effective marketing is a key factor in ensuring your property is not left vacant.

Legal requirements

– Being fully aware of all legal requirements and ensuring that all requirements of government legislation relevant to your investment property are complied with – advising you on your rights and obligations.

Your rent

– Consistently monitoring market trends for rental returns and ensuring your investment is getting the highest possible rental return – regular rental reviews – ensuring tenants pay the rent on time.

Tenant selection

– Ensuring the best quality tenant for your investment property – following strict and professional guidelines in tenant selection, including checking references, employment stability and proof that the tenant is capable of paying the rent and a proven quality in their previous rental history.

Agreement preparation

– Arranging the preparation and signing of the residential tenancy agreement and lodging the rental bond.

Tenant management

– Ensuring the tenant is well educated in the terms of the residential tenancy agreement and that the terms of the tenancy agreement are complied with

– Building a good relationship with the tenant – a happy tenant is a tenant who stays and who will contact their property manager immediately with any issues.

– Acting as a negotiator in any disputes between tenant and landlord. A good property manager can ensure that most disputes between landlords and tenants are solved before they escalate.

Rent collection

– Providing a good range of options for tenants to pay their rent – requiring tenants to pay rent in advance – daily monitoring of incoming rentals – having zero tolerance for any rental delays.

Looking after your investment

– Knowing your property, inside out – conducting regular inspections of your property (as per the legislation) and forwarding you a written report on its condition and any maintenance that may be needed.

– Conducting regular external surveillance of the property to assess the external appearance and to ensure its being well-maintained.

– Giving you feedback to help you budget for larger items of expenditure that may be required – providing an after-hours contact for emergencies.

Communicating

– Communicating well with you on your investment.

Saving you hassle

– No need for you to interact with your tenant at all – paying bills for you – invoicing tenants for user-pays water costs – monitoring and handling any maintenance required, obtaining quotes, dealing with trades people, ensuring the job is well done – providing statements for your tax return.

And if you decide to refresh your investment portfolio

– Liaising with your tenant and your real estate agent to make the sales process easier, smoother and faster – or liaising with your mortgage broker regarding access for valuation purposes, all making things easier for you to refresh your portfolio.

The Right Management solution is one of the most important strings to your investment bow. The management of your property ensures that your investment is being looked after in all aspects. The property manager makes sure that your interests are looked after priority number one! Diligent property management will ensure that your investment property is always tenanted with only top quality tenants.

The point is that the Right Management is the tool that allows you to have a safe worry-free investment solution that is truly ‘Set and Forget’.


Check out the video below:


The Benefits of a Mortgage Broker when Purchasing Property

Monday, July 28, 2014

The Benefits of a Mortgage Broker when Purchasing Property

 

property investment advice 

 

“How to be confident that you have found the right loan and structure so that you can meet long-term financial goals and avoid serious costs – potentially saving 1000’s of dollars in long-term exit fees and interest rates”


Property Investment Advice

“Finding the right loan to meet your needs can be a very daunting task. With so many lenders to choose from and so many products within each lender, it is almost impossible for the average person or investor to sort between the products (including all the fine print). It is important that you are sure the finance you are choosing is the best one for your circumstances.’

 

Property Investment Advice | Example

 

For this bit of property investment advice we would like to use the example of buying a car.

 

If you walk into a Ford car yard and describe all of the features you want in a car and the salesperson thinks to themselves, “Gee, the latest Holden Statesmen would be the best,”– will he tell you that? No! He will convince you that the latest Ford something-or-other meets your needs. It’s the same with the banks. If you walk into a bank, any bank, you will only be sold that bank’s products.

 

We would recommend that everyone who wants to take out a mortgage should use the valuable services of a mortgage broker. Whether you are buying your first home or investment property or whether you are building a huge investment portfolio you should consult a mortgage broker. The advantages of using a broker are twofold. Firstly, it is free – the bank pays the broker the commission – and secondly, the broker is aligned to scores of banks and will find the best for you. It is in the broker’s interest to find the best product because they want your continued business.

 

Brokers have access to over 30 banks and lending institutions, including all of the majors (CBA, St George, NAB, Westpac, etc) and many popular smaller and non-bank lenders (ING, Bankwest, Rams, Suncorp, etc). Mortgage brokers will help you find your way through the complex maze of product choices and help you decide the best one for you. Everyone’s situation is different and different products suit different circumstances.

 

Mortgage brokers also assist you with all of the paperwork, submit the loan, handle all the bank’s annoying questions, co-ordinate the process with your solicitor and real estate agent and basically take all the stress and pressure from you. They’ll ‘hold your hand’ the whole way through and deal with any complications that may arise.Mortgage brokers are one of your main sources for property investment advice.

 

Pros

  • May save you time in shopping for loans.
  • May save money if fully independent.
  • Usually free.
  • Sometimes, given the broker-lender relationship, a bank will accept a loan application that they would otherwise have rejected.

Cons

  • You may pay more for your loan than necessary if the broker is not independent.
  • They may charge excessive fees or undisclosed commissions.
  • You may be persuaded to borrow more than you need, as this will boost their commission.

The cons can be easily overcome by using a broker who can correctly answer the questions above.

 

Check out the video below for more advice on investment properties

 

Real Estate and Superannuation is the most Powerful Wealth Creation tool of all

Monday, July 14, 2014

Since time immemorial it has been argued by numerous opponents as to whether the benefits of investing in property outweigh the tax concessional environment of superannuation. 

From a cynic’s point of view, one could say that the opponent’s opinion’s debate varied considerably depending on their own bias.  And this bias seems to be greatly influenced by the advisor’s commission structure. 

Funnily enough, analysis provided financial advisors proved, without a doubt, that superannuation and shares is the way to go whereas just as convincing arguments, raised by property spruikers, real estate agents and mortgage brokers, suggested that property was by far the superior investment.

Who should you believe? 

A new battalion – property and superannuation join forces?

The battlefield has changed and changed dramatically. 

Why would you choose Property over Super OR Super over Property, when you can have the best of both worlds instead!

So Why has the front line shifted?

New laws introduced in September 2007 allow Self Managed Superannuation Funds (SMSF’s) to, for the first time, buy geared property in a simple and uncomplicated manner. 

SMSF’s can now select a property of their choice, be it;

  • residential
  • commercial,
  • or rural

and borrow up to 75% of the value of the property. 

Previously an investor had to choose between;

  • using his spare funds to invest in a negative geared property,
  • OR contribute the funds to superannuation.  Let’s have a look at an example comparing the two alternatives.

Comparing the two – Option 1:

Take Johnny who is 35 and purchases an investment property.

Presuming average capital growth of 7% and rental yield of 5% (both very achievable) the following scenario occurs at age 60.

Value of Property:  $1,775,328

Mortgage owing: $350,000

Net Value: $1,425,328

Plus, the property has been cash flow positive since year 7 netting a cash flow of $584,480 which Johnny could use for further property investing.

Taking tax out of this amount will bring the returns down to:

                        Net Capital Gain: $1,211,529

Net Cash flow: $409,136

Overall Outcome: $1,620,665

 

(*Presuming a 30% tax rate,8.5% IO Mortgage rate,rent yield grows at 6% in line with property growth, excess cash flow taxed)

Comparing the two – Option 2:

Compare this to Sally who invests the same amount as Johnny into superannuation. Presuming the same growth and yield (if his superannuation was invested in a well diversified growth portfolio) he would achieve a superannuation balance of $432,658 by age 60.  This is well short of the gains made by Johnny.

(*Presuming a 15% tax rate, contributions include the initial deposit and the cash flow shortfall and cease in year 7 when property cash flow positive, no CGT as investment held until after age 60)

Comparing the two - An un-biased opinion

As any professional advisor and serious investor should know there is more to consider than the pure numerical outcome.  Whether considering property or superannuation other important factors need to be considered. 

One of the most important factors is the stage of the investor’s lifecycle. 

In the working years of an investor’s life a strong cash flow allows the possibility of using gearing strategies to maximize returns thus making property a preferential option. 

Once the investor reaches the pre-retirement phase, it may be unwise to take on the risk of gearing.  Therefore, this may be the preferential time to consider locking away as much as possible into super.

The most common investment strategy seen in the baby boomer era was to invest all surplus funds into accessible investments including property and shares and then cashing these in and contributing the funds into super just prior to retirement.  The only disadvantage of this strategy was a potentially very large Capital Gains Tax bill.

Why would you buy property in a SMSF instead of personally?

For many reasons including;

  • you get the benefit of ‘leverage’,
  • a maximum of 15% tax on any rental income in excess of costs,
  • you receive a tax deduction for the loan repayments of principal (which is normally impossible) via salary sacrificing the amount required to cover the shortfall,
  • asset protection – the asset is protected from creditors in the event of a lawsuit or bankruptcy (some conditions apply),
  • the property can still be sold and the loan repaid at any stage,
  • any capital gains on the property when sold will be taxed at a maximum rate of 10% (if asset held for more than 12 months)

 

But the biggest incentive of all – if you keep the properties until age 60 and commence a pension from the fund;

  • any capital gain on the property will be TAX FREE,
  • any rent on the property will be TAX FREE,
  • any income paid out to you will also be TAX FREE.

 

The laws are only new and law complying products are now being introduced and marketed.  It is envisaged that these products will hit the market like a storm once investors realize the potential.  There are already over 350,000 SMSF’s operating in Australia and it is likely that this figure will increase exponentially once knowledge of the loan products becomes widespread. 

In fact, as at May 2010, SMSF’s are growing at a rate of 2500 per month.

It is also interesting to note that this may be the first time in history that all advisors (financial planners, accountants, auditors, property advisors and mortgage brokers) have a common ground for advising clients.  All advisors have something to gain by assisting clients into these products. It’s not only a busy time ahead for advisors but a time to join forces and put a cease fire on the battle.

Property Investment in Brisbane Real Estate is better than Shares

Monday, June 16, 2014

 

Real estate and shares are often considered the two most popular investment options.

Both are long term investments.

The most obvious difference between the two is the amount that can be the amount invested - an investor in the share market can start small by buying shares worth a few thousand dollars whereas real estate investments generally involve a commitment of hundreds of thousands of dollars.

Of course, the fundamental objective of an investor should be to find an investment which generates maximum returns.

A small stock holding will not lead to an early and easy retirement unless that company enjoys an absurdly spectacular escalation in its share price. This rarely occurs. It can happen with mine shares when an unknown company strikes oil or gold.  Betting your future on finding such a company, at the right time, is simple gambling and not a sound investment strategy.

The stock market can be extremely volatile, and driven by sentiment rather than rational financial thinking.   In terms of today's share market, an investor needs to be financially well-educated and prepared to monitor their investment portfolio constantly or pay the often considerable price for professional management.

At times, there is only a very small window of opportunity in which to make the right decision about a share investment.

By comparison, real estate investment delivers the comfortable expectation for a well-chosen property of significant capital growth over time, combined with other attractive benefits which include:

  •     consistent rental income
  •     lower risk
  •     tax advantages
  •     the security of "bricks and mortar" and
  •     the capacity to manage and control your own investment   

The aspect of control is a very important consideration -- shareholders who supposedly "own" the company have no idea of what is really going on with the management of their investment and even if they did, they have no control. Property is a much more tangible option, and as the owner, you can see exactly what condition your investment is in.

But perhaps the best way to compare the two is ‘by the numbers’.

Let’s say you have $500,000 to invest in either Property or Shares.

 


The figures above speak for themselves, shares provide a superior net wealth increase BUT what happens when you take tax benefits into account?

 

 

 

When you take into account the fact that you can ‘borrow more’ or use more ‘leverage’ to invest in porperty the numbers change.

Real Estate is a more Effective Wealth Creation tool than Business

Friday, June 06, 2014

 

Check out the "rich lists" and you will find many business owners. A lot of these entrepreneurs started out with a small business operation or an innovative idea which developed over time into a very large corporation.

There is no doubt that business investments can deliver an extremely lucrative outcome but there can be drawbacks.

Interviews with high net worth business owners reveal a common theme -- an intense focus on the business and a very significant commitment of time, often at the expense of personal needs and relationships. Today's business world is an extremely complicated scene with various facets to consider -- you are required to wear many different hats or pay for a lot of professional advice.

By contrast, an investment in real estate can deliver all the benefits of a business investment and more, but without all the management headaches.

As with a successful business investment, real estate will give you capital growth, an income stream and tax advantages however with business investments there is an appreciably higher risk (many businesses fail) and a drop in liquidity (it can often take a very long period of time to sell a business operation and they can be difficult to value).  The easiest way to say it is that wealth through property investing is just so much easier, understandable and far less risk.  Far more investors lose in business than by property investing. Property investing, by its very nature, investing in bricks and mortar, provides a far more stable and secure investing foundation.

Another factor is funding -- often lenders are reluctant to support the growth plans for a business because it is difficult to get a clear picture of its current financial situation or future prospects. There are generally no such problems with real estate loans because of the easy availability of records and financial data and the more tangible and transparent nature of property assets.  For example, banks will lend up to 95% of the value of a property whereas in most cases they want lend at all for business unless you have property to offer as security. 

While it is possible to operate as a "silent partner" or withdraw from a lot of the day-to-day worries and workloads of a business investment by employing managers, it is in an investor's interest to monitor a business closely.  Property can be a set and forget investment basically as your property manager can look after it for you.  Whereas a business requires constant day to day management.

Property Investing is simply far easier than business investing.

Will Australia Crash like America did?

Friday, May 30, 2014

 

Comparing Australia to America is like comparing Chalk and Cheese’.

As explained in earlier chapters Australia has a

  • Massive undersupply of houses
  • Record Population growth
  • Vacancy rates are at a record low.
  • Demand > Supply

In contrast America has a

  • HUGE oversupply of houses – empty streets, empty suburbs – where no-one wants to rent or buy
  • Very low population growth – if fact, American’s are deserting their own country
  • Horrendous vacancy rates
  • Supply far exceeds Demand

Australia also has different lending policies including 

  • No NINJA loans – Ninja loans are known as ‘No Income, No Job, No Assets’ No problems – here’s your loan.
  • The Amercian banks were also lending up to 110% of the value of the property. So it didn’t matter if the applicant had no deposit  - No problem – here’s your loan.
  • They gave out loans at 0% interest rate then hiked the rate up to 5% and wondered why the owners could no longer afford the loans.
  • They also have ‘Jingle Key Lending’  also known as ‘non-recourse’.  If you couldn’t afford the loan anymore, No problems, send the keys back to the bank and all will be OK.  The bank won’t chase you for anything

In Australia, on the other hand, bank requirements are much more onerous. ‘Lodoc’ loans only make up a very small % of overall lending in Australia and the banks are very careful to not go over 80% of the value of a property to a lodoc applicant.  Loan servicing ability is assessed at 2% above the current standard variable rate.  And all Australian loans (other than for SMSF’s which will be explained in later chapters) are full recourse loans.  If you default on the loan the bank will come after all of your other properties, other assets, your cars, your cash and even your husband or wife if you are lucky (just jokes).

Simply put, comparing Australia to America is like comparing chalk and cheese.

It is worth pointing out though, that America now, may be a fantastic investment opportunity for Australian’s.  You will need to read our later chapter on this issue.  It is not for the faint hearted but a great opportunity for those willing to take the plunge.

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’

Property Utilises the Power of Leverage

Friday, May 23, 2014

 

Leverage is one reason why real estate investment makes so much sense to so many of the wealthy.

Leverage = using other people’s money to make more money

Leverage is also described as making ‘more’ with ‘less’

In the example below – if you have $30,000 and you invest it in the bank you will make a 5% return (based on today’s rates) so $1,500.

But if you take the same $30,000 and invest it in a $300,000 property and lets say it only goes up by 5% (to compare apples with apples) then you have now made $15,000 – 100% more than simply putting the money in the bank.

How good is that?

And, if instead, the property went up by 10% (closer to the average) then you have made $30,000 or 20 times the amount you would have made by putting the money in the bank.

 

And you don’t have to feel bad about using other people’s money.  Institutions called ‘banks’ WANT you to use their money – they make money too. 

Leverage has been a tool used by mankind since cave man ages.  The first spear was invented to catch more prey than the bare hand could.  Then horses were used to pull carts to get us places faster.  The greatest form of leverage in today’s world is the power of the internet.

Property is unique for its ability to be leveraged as you as you can borrow up to 95% of the value of the property.  In contrast to shares where you are lucky if you can raise 60% of the value of the share.

This really means your property investment is working hard for you.

There is a multitude of ways to leverage property in your favour and these include;

  • Leverage the banks money to buy property to make you rental income as an investment;
  • Use rental yield collected from tenant to help pay the mortgage;
  • Improve the property to increase the value of the property
  • Improve the property to gain a higher rental yield.

 

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’

Property Provides Opportunities to Add Value

Monday, May 19, 2014

 

Very little effort can bring about substantial gains by adding value to your real estate investment.

Something as simple as clearing up the garden, a coat of paint, new carpets, modern bench tops or a new bath room can easily add value to a property.

Investors who are able to add value to their property may also do so while enjoying the benefits of tax deductions – either outright in the year incurred or depreciated over a number of years (more about this later on the ongoing costs and tax effect chapters).

Value-adding can also increase the property's cash flow potential - for every $10 extra rental income you get you can usually add an extra $5,200 to the valuation of your property.  This extra equity may be all that is required to get you over the line for your next purchase.

Deciding how to add value to the property is the biggest hurdle and you do not want to over-capitalize on the investment or its capital growth potential.

The simplest rule to follow when value adding to your real estate investment is to keep it simple.

If the kitchen is old and run down and potential tenants are deterred by its state it's probably worthwhile investing in a kitchen renovation. This can be done simply; maybe all you need to do it replace the bench top, splash back and repaint.

Similarly, re-painting the main rooms of the house can be cheap (particularly if you are able to do it yourself) and it can make the house far more appealing to renters (and valuers). 

Every little bit counts when it comes to adding value to your real estate investment -- and it's usually little changes which come at low costs that are most worth your while.

The more equity you have as capital leverage when re-borrowing the better.

 

Do you want to know more? Click here to watch five free webinars on - ‘Proven, Must Know, Property Investment Advice’


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