Will Brisbane and the Gold Coast, will be “the new east coast investment hotspot in 2015 ?« Australia Business & Property Classifieds

Brisbane and the Gold Coast, would be “the new east coast investment hotspot in 2015

Brisbane and the Gold Coast, will be “the new east coast investment hotspot in 2015 « Australia Business & Property Classifieds

What to Consider before Buying Investment Rental Property

What to Consider before Buying Investment Rental Property

A Rental property can be an excellent way to bring in additional income as well as invest in an asset that is actually tangible; however, investing in real estate does involve more than just purchasing a property and watching the money roll in.

Many people believe that the biggest hurdle they may face is obtaining the loan; however, this may be easier than they actually think. It is other issues which you may face along the way which should be considered before you actually take the step of purchasing an investment property

First, always make sure you take the time to know exactly what you can afford. Many people make the mistake of overlooking this step, assuming that the rent alone will cover the mortgage payments and other associated costs.

If you rely solely on rental income and there is a change in the market conditions , you could find yourself in financial trouble later on.   

In addition, you need to give some thought and consideration to the type of property that will best suit you. You can find rental properties in many different sizes as well as types. 

Each of these different types can pull in different rental rates as well as attract different types of renters. So, giving thought to the property that best suits you is really an important step which should not be overlooked.

For example, if you purchase a property that is near a college or university you are likely going to find that most, if not all, of your tenants are college students. While you may never have a vacancy, you may also find that you have a continual turnover, problems collecting rent and even possible damage to the property itself.

You should always research rental properties just as you would any investment with the large amount of money involved. If you do not have the experience, the expertise or the inclination to do this yourself talk to an expert.

Not only do you need to understand the going rates for similar properties you need to decide why you are investing and what type of property best suits your budget, risk analysis and the objectives you set out to achieve

To research yourself check the areas local newspaper for information on going rental rates as well as the internet. The internet is predominantly dominated with Real Estate Agent or Broker advertisements which may not provide a true indication of the actually going rate. A desperate private landlord will drop their price and advertise this usually well before anAgent or Real Estate Broker would do.

Another major consideration is that you will need cash flow to take into consideration expenses which may come up along the way. Ideally, you should have a reserve fund or cash buffer established to tide you over in the event you experience emergency expenses or your property is vacant for a period of time.

Before you commit to purchasing a property, make sure that you obtain some sound advice. This doesn’t mean an Uncle or a mate who knows a cousin who’s Aunty has 30 properties. It is important you take information from an experienced advisor not emotionally or financially involved in the transaction. Making a mistake and purchasing the wrong property can be catastrophic to your financial well being. Don’t allow the sake of a few hundred dollars or so stop you from obtaining independent advice.

In addition, you should make sure you understand your responsibilities as a landlord. Keep in mind that your obligations are typically regulated by the statute laws or legislation in the area which the property is located.

Some states have very little regulation while other states are highly regulated.

If you fail to follow state regulations you could find yourself in for quite a bit of financial as well as legal trouble. It is always best to educate yourself ahead of time.

Finally, make sure you consider how much insurance you will need to not only property the property in the event of damage or destruction but also to cover all liabilities as well. One liability claim can be enough to cause serious repercussions so this is not an issue where you want to take a short-cut. Remember that it is your responsibility as the landlord to provide liability insurance, not your tenant. If someone should slip and fall on your rental property then it will be you who is responsible, not the renter.

Rental investment property truly can be an excellent investment and long term wealth builder provided that you are prepared and understand what you should expect from the outset.

Do not be afraid to seek help where you need it, especially from associations and from professionals such as attorneys. This is the hallmark that can often set a successful rental property investor apart from one who fails.

For More Information on how an Expert Can Help and Where To Find The Right Type Of Expert Visit Our Blog Here

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Vacancy Rates and Rental Properties

From time to time you will have vacancies in your investment rental property and an astute investor will plan for these occurrences. It could even be that when you purchase the property, it could be vacant.

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It is said that on average the amount of time a property is not rented throughout a year will be between 2 - 6 weeks with 4 weeks being the average. You will often see a term called "vacancy rates" which basically will tell you how many rental properties are vacant at any one time. As a guide a vacancy rate below 4% is ok whilst anything below 2% shows good rental demand.

Be sure to compare apples with apples and compare the condition and age of the property in your calculations. Naturally, renters will like a newer property over an older one and if the property has a lot of maintenance issues or has not been well maintained, this will also lead to a higher turnover of tenants and indeed the quality of tenant.

As a Landlord it is always good to remember Good tenants will not have to live in poorly maintained houses.!

Whilst having a low vacancy rate and a quick turn around is important, not having the property tenanted may not be as expensive as you first think.

Whilst you will lose income on the other side though, if you are claiming the expenses of the investment property as a tax deduction the return for the period that the rental property is not tenanted will therefore also reduce your tax liabilities for that period.

It is important to take note though that cash flow should always be your first consideration, Can you afford to maintain the payments etc until the tax relief is available.

In most circumstances you will naturally want to rent the property as quickly as possible so that you do not lose out on any rent money, however if the property needs an update or maintenance this could be the ideal moment.

In this scenario not only will you receive extra tax benefits from receiving no rent, you are also improving the capital value of the property and these improvements may also be a further tax deduction.

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Why Do Properties Not Rent?

There could be many reasons why it could potentially take some time to find tenants. Perhaps the location is affecting it. Or, it could be that there are simply a number of properties for rent in the local area.

Regardless of why your property is vacant you will need to get it rented as quickly as possible.

For every month that your property is vacant, you are losing money in revenue. Whereby if you reduce the rent by say 10% or 20% for the next 12 months you are still receiving 80% - 90% of the income you would like - much better than 0%

The key here is short term leases so as you can increase the rent as prices increase.

There are some other things you can do to reduce the amount of time that your property is vacant;

You might also consider providing some type of incentive ie a new dishwasher or TV in order to get your property rented more quickly. Certainly this will cost a bit of money but in the long run it is often less expensive to provide an incentive in order to get your property rented more quickly than to allow it to sit vacant for a period of time.

You might think about installing something in the property that would be appealing to prospective tenants such as a washer and dryer.

Make sure you making strong efforts to market your rental property by running ads in all of the local papers and hanging up flyers at places of interest.

You can also have a For Rent sign posted on the property so that everyone who drives by will see it and know the property is available for rent or lease.

Once again, a small amount of money spent on marketing is less expensive than the amount of lost revenue you could incur by allowing the property to sit vacant.

In addition, take be proactive and begin the search for tenants before your current tenant moves out if you have reason to believe that they will be leaving soon.

It is never a good idea to wait until the last minute and then try to fill a vacancy.

You could even ask the current tenants if they know of anyone who might be interested in renting the property.
It could be quite possible that they have friends who have visited and would jump at the chance to rent the property once it is available.

Keep in mind; however, that you still need to conduct a thorough screening. The first time you receive an inquiry on the property, you need to begin the screening process. Take the time to obtain some basic preliminary information about applicants while also providing information about your rental property.

Some people will find just as having an expert adviser take care of their finances they will want an expert to manage their property. Whilst finding a tenant may be quicker and easier wusing a Real Estate Broker or Letting Agent there is a cost involved and you are abdigating your control to this company or person. Therefore you should spend just as much time screening and qualifying your property managers as you would potential tenants.

See our Post on Selecting The Right Agent or Real Estate Broker Here

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Has it Been A Good Year For Property?

Has it been a good year for property?

I can not see a lot of confidence in the market, yet prices are rising ? 

Perhaps we are at an equilibrium where we will see a more balanced market going forward? 

Interesting thought, Are we more motivated by making money or does the fear of losing money outweigh our greed?

In my opinion the main problem with any investment at the moment is affordability. Whilst inflation may be under 3% overall, do some research on essential services and see what high inflation is about.

You cannot rip an extra $5000 -$10,000 out of the average families cash flow and expect no flow on effect.

What is the easiest thing you can do to keep in the black,easy forget about the future and stop saving or investing- you need a house to live in, a car to drive, clothes, gas, electricity TODAY, not in 10, 15 or 20 years.

So if you are short on money after losing so much on extra essential services charges what do you think you will give up to make up for it?

Of course, your future financial goals are first on the list. They don't come around to cut the power off if you don't pay unlike your power provider.

Hence it is pretty hard to save your way to Financial Freedom living in a society where boundaries move and you have absolutely no control.

Obviously, this scenario is nothing new, 20 years ago it was oil and petrol, prior to that building materials etc, there will never be a perfect storm in an economy with natural disasters, financial crashes and market cycling happening everyday.

Savvy investors are usually people who make well researched decisions based on reliable modelling, whilst you can never totally remove risk you can plan for it. A plan that takes into account the what if's and provides a strategy that is based on worst case scenario integrated with good risk management and reporting is the most safest, secure and predictable way to success.

Whilst it may take a little longer your journey is going to be so much more relaxed and enjoyable.

If you are struggling to get ahead financially and feel that you are caught up in a scenario where you have the least amount control over your money then perhaps you may need to consider making an effort to stop being reactive and become proactive.

A simple phone consultation can often save our clients over half their term in mortgage payments and still have more cash flow coming in than previously.

It really depends on your circumstances and what you want to achieve, not everyone wants to buy and own investment properties or shares, however you need to find something to reduce the amount of interest and tax you will pay in your lifetime if you want any chance of financial freedom and don't want to be be another million dollar sucker paying your banks CEO's yacht off for them.

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EVER WONDERED WHY SOME LAZY PEOPLE SEEM TO SUCCEED IN BUSINESS YET NICE GUY'S FINISH LAST?

Ever notice how some small businesses seem to thrive under just about any economic conditions, while others constantly struggle and miss opportunities that come their way?

 In part, in might be the type of business, the location, or financial backing. But the most successful business owners display some clear patterns and habits.

And on the flip side of that, other business owners make many of the same mistakes that are often avoidable, especially when it comes to growing a business.

Part of the problem is short-term thinking – chasing the latest shiny advertising object that happens to pass by, for example.

Or spending too much time seeking new customers and not enough taking care of the ones you have.

Solid, long-term growth starts with what I call “inside-out” thinking – doing the things inside your business that you can control, and paying less attention to the outside things you can’t control.

Here are 10 such “inside out” secrets for successful growth.

 1. Change how you think about growth 

Consider growth a constant – not something you switch on or off depending on conditions. For example, many business owners reduce offerings at the first sign of an economic storm, or overspend when the outlook seems rosy. But a steady-as-she-goes approach makes for long term success.

2. Check your ego; seek out sound advice  

You know your business inside and out, but that doesn’t make you an expert at running every part of it. Smart business owners know what they don’t know. Don’t be afraid to ask for advice and then take it.

3. Remember your first fans  

Many entrepreneurs seem to forget who helped them get started. If you have investors, keep them apprised of what’s going on. Good communication is critical.  A good investor group can provide mentoring and other resources, so keep them involved.

4. Share your knowledge 
In today’s social media driven world, success and influence are in the hands of those who share ideas and information. So when you’ve found a great tool or solution, or gained insight, tweet it, blog about it, author an article, post it to Facebook.

5. Hire help to watch your money
Lack of strong accounting and finance can be the only thing keeping you from reaching your financial goals. Find well qualified people who share your vision and then step back and take their advice.

6. Know when to persevere 
Stick to your mission. Many would-be success stories end prematurely because they give up when challenges mount. Don’t let hurdles stop you. Arm yourself with market knowledge and an expert team and push through.

7. But recognize when to change direction 
Still, there are times you may need to change direction or call it day, and having the courage to do so can be liberating. You may end up with a clearer picture of what will or won’t work.

8. Keep cash on hand

One of the biggest mistakes growing businesses make is to run out of cash. While the sun is still shining on your business or before your financial picture has a chance to turn sour, meet with lenders and/or landlords proactively to see if there are opportunities to restructure debt, payment terms, etc. Having cash on hand is critical for staying afloat and continuing to grow.

9. Get more when you have more
Don’t wait until cash balances get low to secure more funding. The best time to get more is when you don’t need it. Securing a line of credit while you still have money in the bank gives you the ability to negotiate a larger line and better terms. It also gives you the ability to make payroll during slow times and to have access to cash as needed. In addition, it gives you an opportunity to develop a business relationship with a bank.

10. Sell when you get the chance
Many business owners miss, or worse – pass up – incredible chances to sell their company because they are not prepared to adequately evaluate the opportunity. Know where you stand in the marketplace at all times. That includes what your potential is, and what it will take to reach your potential.  That way, when opportunity knocks, you’ll know

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Does Adelaide have an  over supply of new properties?

According to recent research, Adelaide has been building approx 18,000 new homes a year yet our demand has been around 6000 per year.

On a positive note ,the Australian market in general has reached an equilibrium where supply and demand have become near equal. This is the first time since 2010 where since then we were building 167,000 new dwellings a year with a demand for 121,000.

Currently we are building approximately 139,000 new dwellings with 137,000 needed.

The states with more demand than property currently are NSW, QLD & Perth.

So does this mean that Adelaide is a poor option for a property investor and the above markets are where you should invest, absolutely not, what it tells you is that there are places in Adelaide where there is way too much supply to meet demand, this will result in poor growth until this turns around.

Therefore it could be a good time to pick up a bargain in these areas now and wait until the supply to demand ratio turns around. Warren Buffet's golden rule is buy when people are fearful and sell when they are greedy.

Further, every market has smaller markets, therefore you can not rely on broad research for an area, sure there is a mass over supply of new builds in the North & South of Adelaide, however within 10kms of the city, there are many good value areas where no more land is available. These could be the gold mines where you purchase now at a discounted price due to market conditions with the expectation the demand will greatly out strip supply once the market turns.

As you can see this is just one part of the equation in becoming a successful property investor

Private Landlords

Landlords Go It Alone

It’s no secret that the majority of landlords are often less than satisfied with the level of service and support that they receive from their property management team.

In 2012, overall satisfaction levels for landlords dealing with the property management industry were lower than ever, and it’s easy to see why; with rental arrears seldom followed up, inspections completed rarely, if at all,  questionable paperwork practices and non-compliance with notice requirements among the list of the most common complaints.

In most cases, it may come down to a simple lack of commitment; for the overwhelming majority of property investment companies, more than 80% of total profits come from property sales, which means that rental management is low on the list of their overall priorities. It stands to reason that sales jobs within a property management company are the most coveted, leaving the most junior staff members responsible for the rental management obligations.

Unless the property management company was chosen based solely on their commitment to the rental market, or they have specialized and experienced rental experts on the team, it’s likely that the property manager in charge of your investment is an entry level staff member, on an entry level wage, with more properties to manage than is possible to take care of adequately, and no financial incentive to do a better job.

Having an inattentive property manager can be a frustrating prospect, but beyond the frustration of a company that doesn’t offer a timely response to enquiries, or doesn’t provide the right kind of support, is the risk of getting caught out financially because the agency isn’t paying sufficient attention to the tenants.

It’s well documented that the further behind a tenant falls in rental fees, the more difficult it will be for them to get back on top of the payments. The fewer inspections taking the place, the more likely it is that damage or cleanliness issues will go unnoticed. Additionally, it’s a safe bet that if the landlord isn’t feeling supported by the property management company, it’s more than likely that the tenant won’t be either, which could result in higher tenant turnover and could even be damaging to your personal or business reputation.

What is The Answer?

With trust among landlords and property management companies at all-time low, and the number of landlord complaints at an all-time high, the Real Estate Institute of South Australia recently called for more regulation and licensing of property managers; but with government departments already struggling to balance their limited resources, and current laws often unable to be satisfactorily enforced because of limits on staff, it raises some questions as to how the new regulations will be adequately policed.

With no fundamental changes to the property management structure in sight, and with so much at stake, savvy investors are taking matters into their own hands. More and more property investors are learning that it’s better to outsource some of the property management responsibilities while retaining overall control of their investments.

According to Mark Woschnak, CEO of rent.com.au, 40% of current rental properties are listed by non-agents, compared with only 5% of homes for sale; and that number is increasing all the time.

More people are renting than ever before, and that level of demand allows private landlords to make the most of market conditions, while enjoying freedom from dealing with a less than stellar property management company. Specific tasks like screening prospective tenants, inspections and rent collection can be easily outsourced to professional personnel on market-competitive terms, and can save hundreds, if not thousands, of dollars a year, not to mention your sanity.