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In recent years over the fringes of Sydney, we’ve seen a great number of new property developments pop up, offering budget house and land packages with great incentives for investors.

house and land packages

Halifax 401

New developments such as Ropes Crossing, in St Mary’s, Jordan Springs, near Penrith and Gregory Hills, near Narellan, offer new house and land packages for as little as $230,000 with extra included incentives like builder paid stamp-duty and tax rebates.

Investment Property Coach, David Ferguson from Sydney, said that the supply and

demand for housing in the Sydney market is booming. This is a great opportunity for investors to snap up one of these packages as soon as they can.

“It’s not uncommon for new house and land packages to go instantly,” said David.

“In today’s market there’s just a desperate shortage of stock.”

At the moment there are 1,000 people per week moving into Sydney. Where are they going to live? There’s huge pressure to provide more housing and the shortage of land at the moment is a clear indication that the pressure won’t ease soon” he said.

With the Sydney property market under this type of pressure, investors can expect to make good returns on these new developments. House and Land packages are the standard type of purchase for investors in theses areas.

“When developers open up a new suburb they price the initial release competitively. They may sell places for $250,000 then, after it looks like a suburb, they’ll bump the prices up by $50,000 or so. The people who bought there initially get that price bump straight off the bat, should they choose to sell” said David.

“The reason they do this is to entice people to buy before the area is fully developed. It’s not so much a risk, it’s being able to look at a plan or a model and see the potential”.

On top of this initial value increase, a new suburb will continue to increase steadily in price as further developing continues around it.

Developments like rail infrastructure, new village centres and recreational land will add significant value to the property. In new developments, these are usually already factored into the development plans for the area.

David stressed the importance, however, of knowing what you are buying when signing up for a house and land package.

“Make sure all the trimmings are included,” he said.

“A house and land package isn’t a package if a fence or driveway is an ‘optional extra'”.

He also encouraged opting for extras where possible. Things like built in wardrobes or larger appliances in the kitchen can be worth the extra money as they appeal to the market and will help secure tenants.

“Extras like a 900ml cook-top in the kitchen will entice buyers or tenants to choose your property over others and will ensure you always have someone renting.” he said.

See some of our current house and land packages below.

http://investmentproperty-howto.com.au/buy-investment-property/tangala-drive-illoura-jordan-springs/

 

By Jordan Cox and James Parnwell

 

Property marketThe property market in Sydney is expected to rise by an average of more than 6% per annum over the next three years, according to BIS Shrapnel.

Over the next three years, market analysts expect that prices will rise consistently, bumping up houses currently valued at $670,000 to $795,000 in 2016.

The increase is a result of property demand in Sydney partnered with an improved affordability of housing thanks to low interest rates.

This is great news for the current property market which has managed to stay reasonably stable through the global recession. While the recovery will be uneven among the states, particularly in 2014/15, the growth is encouraging for investors.

Other major cities are also expected to see significant increase in their property market with prices in Brisbane expected to increase up to 17%, Perth 15% and Darwin 10%.

Melbourne, Adelaide, Canberra and Hobart are expected to rise only 5% due to a recent balance of housing availability and demand.

“Thanks to recent strong peaks in construction that exceeded the demand for new dwellings, Victoria, South Australia, Tasmania and the Australian Capital won’t reap the price rewards like other states,” said BIS Shrapnel senior manager and study author, Angie Zigomanis to The Property Observer.

“Economically, these states are also under-performing due to a fall-off in construction and a negative impact to industry from the high Australian dollar,” she said.

The strongest growth is expected over the next 12 months and will then taper off as unemployment and a lack of population growth affect the property market.

Rental prices are also expected to rise in the due to demand and recent weak price growth.

Zigomanis said the general improvement in residential markets since the latter half of 2012 has been initiated by the low interest rate environment.

“Since October 2011, the official cash rate has fallen by 200 basis points, translating to a 160 basis point fall in variable rates. As a result, we are seeing some improvement in some residential market indicators,” she said.

“Lending to both owner-occupiers and investors has been trending upwards.”

She said while current low interest rates will encourage retail spending and more property construction, by June 2016 all property markets are forecast to be impacted by rising interest rates as the Reserve Bank moves to neutralize rates over 2015 and 2016.

Article based from and article on http://www.propertyobserver.com.au (Written by Larry Schlesinger)

written By Jordan Cox

residential equityResidential equity is a powerful tool for wealth creation.  If you are a keen investor, pulling out your residential equity and refinancing your mortgage can grow your property portfolio significantly. We’ve looked at ways you can best use your residential equity to safely build wealth and expand your investments.

How do I calculate my residential equity?

Organise to have your property valued and then subtract any debt remaining on your mortgage from the current value of the property.  Residential equity is not based on the original price of the property but instead on what you have left to pay off! This is an incentive to be making greater mortgage payments as it increases your equity!

Be aware that sometimes the valuer can be wrong and the real market value of your property may not match what your valuer had initially advised.

Capital growth also plays a significant part in how your equity grows. Diligently paying off your mortgage promises a gradual increase in your equity but fluctuation in capital growth can significantly knock around the equity in your property. If capital growth is increasing even as slightly as 10% pa your $500,000 property will increase in equity by $50,000.

Can I control the capital growth affecting my residential equity?

You can’t control outside capital growth affecting your residential equity but you can influence its effect on your property. Look at ways that you can add value to your property that are inexpensive to you.

Think about renovating! While you shouldn’t underestimate the value of a coat of paint, you may be able to borrow out of your residential equity to accomplish bigger renovations.

Major renovations like a new bathroom or kitchen add the most value to your property but they need to be done well to ensure they maintain equity for a long time.  For more affordable renovations, a repaint in a neutral colour can add a significant amount of value to the home.

If the house has hardwood floors, sanding and polishing them can add instant value, getting the gardens re-landscaped or even maintained makes a huge difference if you are looking to sell. For more major renovations, look at how you can create open living spaces and provide more storage.

Adding this kind of value will not only minimise the effect of negative capital growth but it will boost your residential equity when capital growth is in your favour!

How can I take the residential equity out of my property to expand my investment portfolio?

Negotiating how much of the equity you can take out of your property with the bank can be challenging. Keep in mind that just because the bank may offer to give you up to 90% doesn’t mean you should. If you are taking equity out of your property to stand against a new loan the bank will calculate a loan to value ratio. Work out exactly how much equity you will have left in your home after this is done and think about how a negative capital growth and your mortgage repayments will affect it. While freeing up some of your equity to expand your property portfolio can be good, you still want to keep enough in your current property to maintain security.

Line of credit:

Basically this is a massive credit card secured on your property (so make sure you plan this wisely).

You’ll be approved a certain credit amount based on your usable equity, but only pay interest on the portion you spend. Your line of credit can also be linked to an offset account to reduce the amount of interest that your loan accrues, without increasing your repayments.

Think about having your salary paid into your offset account. This will help you to pay off your mortgage faster or save money on interest. It also means you will have the money there should an investment opportunity arise.

Lump sum:

In this case you will be paying interest on it all instantly at the current mortgage rates. A lump sum is useful if you have accounted for this and know that your new investment is worth it.

Cross- collateralisation:

Is a risky way of expanding your property portfolio. Basically, you are using the equity from your existing property as collateral security for itself and another property.

If the debt you have on your existing property prevents you from refinancing, cross-collateralisation is an option you can consider taking.  Be wary, however, that you are putting all your eggs in the one basket and if you fail to maintain repayments you are risking losing it all.

Article referenced from http://www.yourinvestmentpropertymag.com.au

Written by Jordan Cox

how to invest

how to invest

We know that property investment is a great way of building your finances so that you are able to retire comfortably. But what if you’re already retired? Should you invest to make more or just sit back and learn to live comfortably with what you have? We discuss how to invest after retirement.

We said in a recent blog that in order to retire comfortably, comfortably meaning to be able to afford to retire, you need to have atleast 1million dollars collectively in yours and your partners superannuation account.

So if you’ve just set up your retirement plan with a good-looking 300,000 dollars, you might want to look at re-investing.

The beauty of investing later in life is that you probably have already set yourself up financially and are in a position where you own your own home and have probably pulled out cash from previous investments. You’ve probably got a few ‘wins’ in the property game and confidently know how to invest.

The aim here is not to go back to work so that you can invest your retirement back into the market in the hope of again retiring in ten years. You want to find a plan, like you would have when you first started investing, that works for your current lifestyle and financial situation.

Things to think about

  • What can you and your partner afford to invest?
  • What will you have to cut back on in order for this to work? (remember, investing always takes sacrifice in order to reap the benefits, but your partner probably won’t be happy with you cancelling a long anticipated round the world trip in order to go back into investment).
  • How long are you planning to invest before you think about a full retirement?

How to invest after retirement

There are three basic choices that the average person will have if they are looking to invest after retirement.

You can but your investment amount into a bank deposit, transfer it into a trust fund, or put it into property. These choices all offer a steady increase and don’t have too much risk involved.

  • A bank deposit is the obvious choice when coming into a large amount of money. $300,000 in the bank with a 10% interest rate will make a $30,000 each year. Not bad, but after $7000 out in tax and splitting it with your partner, you’re really only making it $11,500 each.
  • Putting your superannuation into a managed fund offers security and cuts out the stress of having to manage and watch the money yourself BUT it will mean you will have to go back to full-time work. The other important thing to be aware of is that few banks will lend to you unless it is against property.

Investing in property will probably mean you, or one of you, will have to enter the workforce again, probably part time. Plan a time frame that you will be happy to do this for in order to achieve your goals

Semi-retirement for 5 years may not be so bad if you will one day retire with riches!

 

 

 

 

property bubble

Property Bubble

Google ‘Australian property’ and the first websites to appear will discuss the idea of a property bubble in Australia.  The property bubble speculates that Australian property prices may currently be higher than their worth due to housing becoming an investment tool.

Property professionals around the country say different things. While some property analysts will agree with comments that Australia may be the biggest property bubble in world and will “burst in spectacular style” (wikipedia), others say housing prices are true to their value.

Economic bubbles are normal in global economic history and occur periodically depending on the speed that housing prices increase or decline in value.

A property bubble will burst when factors that would normally determine value such as wages and taxes change dramatically.

Using property as an investment tool doesn’t affect the market or put it into a bubble. Investing is infact helping to build the economy and helping to deal with the lack of housing through providing options to rent. Investing remains a great way to build wealth in Australia, because there is a need for more property and people are still willing to pay the prices asked.

Australia and America Property Bubble Comparison

Because of the supply and demand affecting Australia’s property market, Australia isn’t facing a property crisis like our friends in the United States of America.

Sydney, in particular, is currently facing an ‘undersupply’ meaning there are more people in need of housing than is available. This keeps the value of property prices in the country true because when a property goes on the market, it sells.

CPI pay rises make housing prices still affordable in Australia. In comparison to the USA, where the banks gave credit to people that couldn’t afford housing on a massive scale then when the property market burst there was a huge oversupply and overpricing of housing, our economy is stable and banks are only giving loans to those who can afford it.

According to a blog by ‘Who Crashed The Economy’ (http://www.whocrashedtheeconomy.com/blog/category/australian-housing/) ‘unaffordability’ in housing is a real issue for Australians so much so that if the government tends to it, it could determine the result of the election.

If this was the case, the Government would only offer housing grants, which would lead to a similar crash to the US.

Instead, ‘Who Crashed The Economy’ argue that we are in a property bubble that is too big to bust meaning that property will continue to become more and more unaffordable and eventually nose dive into a significant recession. So far, our government has managed to avoid the most recent Global Recession better than any developed country in the world.

As long as lending doesn’t exceed what people can afford and the population continues to grow at a rate that demands more housing be built, we are in no danger of an economy collapse.

 

Written by Jordan Cox and James Parnwell.