So the home buyer and property investor show has been doing the rounds in Australia this year and heads to Melbourne from August 29-31. Whilst it may not be everyone’s idea of an amazing weekend activity, if you’re eager to learn more about property investment and hear from a range of experts it’s a great opportunity. There are a variety of seminars over the three days that cover topics from mortgages and finance through to depreciation and renovations. And at $18 for an online ticket it just might be some of the best money that you can invest!
Resources
Common financial mistakes that landlords make
Many landlords fall into the same traps, but if you are not careful these consistent oversights can turn into huge landslides of trouble.
Setting the rent too high or too low
Before purchasing an investment property, extensive research must be carried out to determine an appropriate rental price. If the rent is set too high, the property might not attract enough interest from prospective tenants. It will sit vacant and gathering dust while you achieve no profit return. On the other hand, if the rent is set too low you may experience financial pressure and the property may attract undesirable tenants.
Look at listings similar to yours in both features and locality to gage what the rental price should be.
If a property manager is hired, they should be able to provide you with information on similar listings and advise you on an appropriate rental price.
Failing to keep track…
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Invest For Success: Preparing Your Rental Property to Attract the Best Tenants
Forget second-hand furniture and dirty accommodation; today tenants have choice and know what they are looking for in a rental property. To attract the most prospective tenants to your rental property it needs to be attractive, stylish and practical.
The need to “invest for success” is never truer than with a rental property. By investing wisely in the decor and fittings you will reduce vacancy times by attracting tenants quickly and retaining them for longer periods.
So, what should you do to your rental property?
Decor
Less is more. Avoid fussy decor that is difficult to keep clean or is too delicate to last the course. Choose light and neutral colour schemes to give the feel of increased space. Avoid light tones in carpets as these will quickly show dirt and marks. (Tip: You can often source good quality second-hand carpet from online auctions and your local paper). Whilst you…
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Property investment should be approached like a business
Some wise words from Mr Bouris…
Regional Property Prices
As you may have picked up I’m passionate about regional investment and it forms a large part of my portfolio. A lot of people are skeptical about regional investment and subsequently limit themselves to capital cities. Whilst capital cities have often shown better capital growth than some regional areas there are also some great reasons to consider investing outside of metropolitan areas, not the least of which is that it’s commonly a lot less expensive to get into the market. I have heard many people comment about how expensive it is to purchase in capital cities and that sometimes it’s next to impossible, however in the same breath you’ll hear them comment that regional cities don’t return the same capital growth, so what do they do? Nothing!
It’s important to do your homework and weigh up the pros and cons before you limit yourself to just one market which can potentially mean you end up doing nothing and waiting for the prices to drop (it might never happen!). Today I came across the data below which provides the median (not medium as written!) value of a large range of Victorian towns and cities. Information like this can be difficult to come across so it’s good when you can find it. Click on the image below to be taken to the active site. There you can also select and search by region.
REIA response to Renovating Housing Policy
Following on from my post this week regarding the Grattan Institute Report on housing policy it’s not surprising that the Real Estate Institute of Australia (REIA) has responded quickly to the recommendations in the report. Published this week on the Your Investment Property website is the following article outlining the response from the REIA. Once again it’s always fascinating to see the debate it stirs up in the comments posted after the article. You can access the original article here, or, read below.
Hands Off Negative Gearing, Warns REIA
A report issued earlier this week slamming government housing policies has provoked a strong reaction from the Real Estate Institute of Australia (REIA), which said a recommendation to scrap negative gearing is ‘short-sighted’.
The REIA said it agrees with the Grattan Institute Renovating Housing Policy report in that a major overhaul of housing policy in Australia is needed, but disagreed with what needs to be done.
“We strongly agree with the report’s recommendations to eliminate stamp duties, however it’s essential negative gearing be retained in its current form for the purpose of property investment,” said REIA president Peter Bushby
“REIA has always supported negative gearing because it helps in the provision of rental accommodation. Negative gearing for property investment is complementary to the goals of the Government’s Housing Affordability Fund (HAF) in addressing the supply of rental accommodation.”
Bushby said removing negative gearing would show that Australians ‘haven’t learnt anything from history’.
“When negative gearing was abolished in 1985 it had disastrous consequences for the property market and for people trying to rent. Rents rose 37% across Australia and by 57% in Sydney.
“Thankfully, negative gearing was reinstated in 1987. It is far too short-sighted to link investor interest in housing to negative gearing alone. Negative gearing is only one of a range of factors that contribute to the level of investment in property. Other factors include interest rates, availability and accessibility of finance, share market performance, the unemployment rate, housing supply and consumer confidence.”
Bushby said the ‘myth’ that negative gearing is a plaything of the well-heeled also needs to be dispelled. He claims the majority of taxpayers with negatively geared property earn less than $80,000 per annum.
“Findings in the Renovating Housing Policy report are important and let’s hope they assist in kick-starting a debate on housing policy. With the new government, expectations that industry will be involved in finding workable solutions to these old issues are high.”
Renovating Housing Policy
The Grattan Institute was formed in 2008 as an ‘independent think tank’ intended to develop public policy for Australia. This week there has been a lot of media commentary about a publication by the institute addressing housing policy in Australia. Renovating Housing Policy was published on October 20th and states:
This report looks at our complex housing system as a whole. By quantifying the major government outlays on the private housing system, it reveals the cumulative impact of housing policies both on individual choices of where and how to live, and on productivity and inequality in our cities.
The initial part of the report examines some fascinating trends and demographics related to home ownership in Australia, there is interesting data presented on the change in home ownership rates over the last 100 years as well as examination of current ownership rates by age as well as earnings. It then continues on to look at renting in Australia and it is from here that the information presented starts to become increasingly relevant to property investors. There is also significant focus within the report looking at the different government support provided to property owners versus those who rent a home. The report states that support for residential property investors costs $6.8 billion a year,or about $4,500 per year for each investor household. If you want to skip to the really interesting part though I’d suggest heading straight to page 36 where the recommendations commence. There are three main recommendations looking at stamp duty and property tax, reform of tax incentives for property investment and also reform of the private rental sector.
Whilst I certainly don’t agree with all of the proposals there appears to be some strong evidence available to support the statements being put forward. What I have found interesting is the way that it has been portrayed in a range of media and particularly the comments that have been posted by readers. I’d be eager to hear people’s thoughts on this as it would have a significant impact on property investors should these recommendations be put into practice. Don’t be afraid to comment below! Click here to read the article.
You can also check out some of the following media articles, don’t forget to check the reader’s comments, it’s certainly stirred up some debate!
MoneySmartAu
Thanks to my good friend and avid reader of my blog Renee for reminding us of the great website www.moneysmart.gov.au and also their Facebook page. The website is full of great (and sensible) suggestions and ideas looking at money management, borrowing, credit and importantly property investing just to name a few. It’s an Australian site but a lot of the information could be utilised wherever you may be living. The Facebook page poses regular questions to readers about their own thoughts on money management and contains some excellent (and provocative) discussions. Posted yesterday was the question ‘Do you think it’s easier to rent or buy a home?‘ Check it out and see what people are thinking. Is there a right or wrong answer to this question? The range of discussion suggests maybe not! There is also a MoneySmartAu YouTube channel that has a range of videos on some really useful money management ideas.
Company Title vs. Strata Title
When looking to purchase property it can sometimes feel like you have to start learning a new language and it’s not that far from the truth. There are a lot of terms that you need to learn about and start to understand what they mean. As frustrating as this can be, it’s crucial to make sure that you can speak at least some of the language of real estate to ensure that you have a good idea of what you’re getting in to and that you can avoid being bamboozled by agents talking the talk. One term that you will hear a lot, mainly when there are multiple dwellings in a group (units, apartments etc) is Strata Title. Another one that you may hear less often is Company Title. Let’s look at this fascinating unit recently for sale that highlights the difference between Strata and Company Title.
This one bedroom apartment recently listed (and already under offer) in Sydney’s beautiful Potts Point has been shut up for the last 20 years and has not been lived in for all of that time. 20 years ago similar units to this were selling for around $75,000, in 2013 however it’s priced at more than $436,000, not surprising at all when you can get views of the Opera House and Harbour Bridge from the common roof terrace! It’s certainly a unique offering which hit the news quickly and looks like it’s been snapped up just as quickly.
The interesting thing about this apartment though is that it’s listed as Company Title not the more common Strata Title. With strata title schemes they are divided into lots and common property. The feature of strata title is that each lot will come with it’s own title deed that can usually be bought, sold and mortgaged without any consent being needed from other lot owners or the building management. The owners also have an entitlement and relevant obligation for the use, maintenance and upkeep of the remaining common area outside of the individually owned lots (ie: driveways, paths, gardens, stairwells etc). Strata title was instigated by property developers in the 1960’s, prior to this, company title was a common method of ‘ownership’ in apartment and unit complexes.
A lot of company title complexes were set up in the 1920’s and 30’s and it’s not a surprise for the property above that was built in 1929. The difference with this title however is significant. Company title allows people to buy shares in the company that owns the building and the ownership of those shares allows the person to live in the unit. The large difference is that the purchaser will not receive any certificate of title for the property. There are also often restrictions on any subsequent leasing of the property and also the prospective owner may need to be approved by the company board of directors. Some lenders are also reluctant to lend as much for a company title property so it’s important to take this into consideration. If you hunt around there is a lot of useful information on the differences in property titles. This article gives a useful overview of the pros and cons related to company title. If you know of other useful resources, post them below!
Landlordism 