How will these Super changes affect you?
Did you hear about the recent policy changes that could affect your retirement (no matter how far that is away!)?
From new Stamp Duty policies to new superannuation policies, these could mean changes to your current and future property investment decisions.
We want to make sure you know what these changes, the opportunities created as well as avoiding the risks involved.
Here are the facts:
Retirees are now given incentives to downsize
Australians aged over 65 who sell their home which they have owned for over a decade will be able to put up to $300,000 in sale proceeds into their superannuation.
This incentive to downsize will help free up larger homes for families to move into and offer the sea change lifestyle they might be looking for.
Investors won’t be able to claim travel deductions
Investors who previously has travel expense tax deductions related to their investment property will no longer be able to make these claims, even if travelling to collect rent, maintain or inspect a premises, they will not be allowed as tax deductions.
New Superannuation “transition to retirement” rules have been implemented and there is no longer a compulsory retirement age. Access to your super depends of your super preservation age between 55 and 60 and the age pension age has been increased from 65 to 67.
There are also new contribution caps introduced such as the concessional Contribution Cap is universal $25,000 for all. Non-concessional contribution cap is now $100,000pm (was $180,000pa) as well as the Introduction of Balance transfer Cap at $1.6million per person
New Home Buyers Super Saver
The new super saver scheme will allow first-time home buyers to put up to $15,000 a year, to a maximum of $30,000 into their superannuation.
These funds can later be withdrawn for a home deposit, including any earnings the deposits have made.
This means a tax incentive to save more, and can be taken advantage of as a couple with each claiming $30,000.
For more information of changes please visit your local government’s website.
How to get into the property market
In today’s economy it’s no surprise that Australian homes are some of the most expensive in the world. Many of the younger generation deem buying property as unaffordable and out of reach.
But we still want a piece of the Australian dream and property investing is still a wise financial choice long term.
The plus side is interest rates are at record lows as well as loan options being readily available with so much competition in the market.
But don’t despair, home ownership may still be within your reach. Here are some tips to get into the property market that you may not have thought of!
- Buy with your parents or friends. This option is a way to get a step into the property market by pooling finances and deposits together as well as making repayments more affordable. Just ensure you get legal advice to ensure the right ownership structure to avoid issues down the track such as selling.
- The Shared Home Ownership Scheme (for those in WA)
This is a scheme offered by the WA state government. For as little as a $2000 deposit or 2% of the purchase price, the scheme enables the purchase of a newly built off the plan property using a state government loan. The government retains part ownership of the home but you have the option to buy and sell when you please, and eventually own the property outright. In other states there are companies such as BRICKX where you can buy “shares” in a property much like shares.
- Buy an investment property first instead of a home to live in/ family home. By renting out your investment property you will be able to build a portfolio faster. Regional investment properties are a great option as they can be cheaper with better rent and yields. It could even be a cash flow positive investment that puts money back in your pocket or if it does make a loss it could reduce your taxable income. Ensure you speak to your accountant and get advice with the right loan options.
- Consider a Bridge Loan
A Bridge Loan is a short-term loan to a buyer who is typically in the process of both selling and purchasing or developing real estate. It could be a useful option to not miss out on a property that’s currently on the market.
- Other types of property investment
Other options could also be investing through superannuation or a managed fund. Again ensure you speak to the right professionals to make the best property decision for you.
Saving a deposit for your first home and getting on the property ladder can be a challenge with current house prices, but there are alternative ways of achieving your goal and starting your investment portfolio.
Contact us today to discuss the right loan and potential property investment strategy for you.
How to sell your home in winter
Winter has well and truly hit in WA. Real Estate agents know they have to work extra hard to sell their clients homes at this time of the year as many buyers stay at home instead of venturing to home opens and otherwise beautifully presented homes for sale don’t look their best through the rain and bleak winter days.
However this is upside to selling in winter. Less competition and fewer houses on the market can be in your favour together with the following tips:
Leaky gutters, broken roof tiles and other winter problems become more obvious and more important to fix in winter. Ensuring everything is in proper working order will prevent any problems arising in your home opens or after sale.
Focus on making your home winter friendly
for home opens, first impressions count. Ensure your home is warm with heating, there are welcome mats for wet and muddy shoes and even an umbrella stand can make all the difference in welcoming potential buyers.
For Sale Photos
Just because you’re selling your home in winter doesn’t mean your photos need to be wintery! Twilight photos are a great way to make your home stand out on the property portals when sunny days are hard to come by. This will assist your property to stand out above the crowd when others sellers have their photography done on overcast days
Some homes are positioned so they get great winter light and can really stand out during the cooler months. Regardless, by opening all your blinds and curtains you can maximise light for your home opens and photographs.
Additional lighting such as floor lamps and stronger light bulbs can assist creating a warmer environment.
Interior Space Appeal
Although many Perth homes focus on the outdoor BBQ and alfresco areas, use winter as a time to showcase your homes internal features such as a kid’s indoor playroom, theatre rooms and indoor entertaining areas.
You can also feature external areas that are winter friendly. These can be an alfresco that can be sheltered with roll down blind’s, heated/well insulated tool and storage sheds and outdoor heaters and lighting.
Although we can’t control the weather, these tips will help you maximise your house regardless of the weather. Our real estate agents are experienced with selling properties no matter what the circumstances.
Why consider one bedroom apartments
One bedroom apartments have always been a point of contention among investors in the property market.
Affordability factors and changing lifestyle preferences are now seeming to give these a real edge in Australia’s every changing current property market.
Here are a few factors to consider whether to include one bedroom apartments in your property investing search:
1) A better location
Research is showing a one-bedroom apartment in a good inner city location which is close to transport, employment and lifestyle amenities cans outperform a two bedroom apartment in a outer fringe location without the same amentities.
A one bedroom apartment can also get you into the market if you want to buy in a desirable area, close to the CBD and transport. There is also lower upkeep costs for smaller apartment and negotiating finance for one-bedroom units is certainly becoming easier with the banks.
According to some property commentators, there is greater tenant demand for small units, as the trend is moving to inner city locations for lifestyle choice which is boosting prices for one bedroom apartments.
4) It’s not just one bedroom apartments
If lifestyle and inner city living is your focus, there are more than just apartments with one bedroom. One bedroom townhouses and villas, especially in older established areas in major cities are available. Old workers cottages and small terraces could be a great way to renovate and add value to as an investor and you may be able to even extend the property down the track.
Apartment buyers need to remember that these days demand for land isn’t the same as it used to be driving the residential property market.
Many people are out to buy or rent lifestyle and are prepared to make the necessary trade offs just as living in a smaller space to live in a premium location.
Property buyers today whether investors or owner occupiers really are looking for somewhere to live that is conveniently located and packed with amenity and one bedroom apartments fit this mould.
Why Real Estate still tops the list for Investors
With fear of property price fluctuations, economy shifts and the government’s budget right around the corner, it is high time I did a blog on debunking some of the conventional myths about property investing in the current market.
There are a number of reasons why real estate investing remains the most popular investment pick in the country.
1. There’s always more than one way to invest in real estate
And it’s more than just the capital gains perspective. A primary strategy can also be for cash flow. Property offers many different strategy and outcome options based on short and long term, high and low yield. Take the NRAS (national rental affordability scheme) for example which is a partnership between the Australian Government and the States and Territories to invest in affordable rental housing which can lead to a positive cash flow investment.
A rising trend in investing is through Real estate investment groups which is like a small mutual fund for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you.
2. Leverage the banks money
When comparing investment classes and talking cash down VS percentage of return value, real estate generally comes out on top.
On a typical real estate investment, you usually require a deposit of 5-10% of the value of the investment while the bank puts in around 90% of the value.
And if you’re really savvy, you can find investors to cover some of the deposit, limiting your cash outlay.
This allows you to have the potential for a much greater return on investment (ROI) and leverage up to 90% of your assets performance on someone else’s money.
3. Invest Countercyclical
Read about the world’s leading investors both past and current and one commonality can be formed from their varying strategies. You buy when things are down and sell when things are up. Simple strategy yes? But not as easy to execute. These investors have the insight, liquidity and guts to invest during times of market turmoil when fear and uncertainty are at their highest and most investors and buyers are running for the hills or sitting on their hands. The best deals are made in times like these.
We have done many property clock blogs in the past talking about market cycles which you can find here
4. Your tenants pay
With property investment, the value comes from the rent your tenants pay (this is your gross income). Just like a business, you calculate your gross expenses and subtract them from your gross income to determine if the resulting net income is worth the investment.
Investment properties such as positively geared and positive cash flow investments also make it possible to hold an investment property that will cover your operating costs, like repairs and maintenance as well as your loan expenses.
The NRAS (national rental affordability scheme) can also assist with this strategy that lets the rent pay off your mortgage and allows eligible individuals and families are able to rent NRAS dwellings at a rate that is at least 20 per cent below market value rent.
5. Hidden profit
There is some hidden profit opportunities that real estate provides and that’s getting smart and knowing your possible tax benefits.
Most of us know about negative gearing reducing your overall taxable income by allowing you to claim the difference between income and costs as a deduction. Make sure you are aware of any costs associated with your property investment can also reduce your income as there are a wide range available to claim.
Depreciation is another tax benefit that property investors can claim. You can depreciate a percentage of your property each year as a loss, lowering your taxable income.
Some investment properties also qualify for ‘capital allowance’ or ‘building allowance’ depreciation. In this case, depreciation is related to the building itself.
Additionally, there are many other benefits you can discuss with your accountant or financial planner.
No matter what the market, these benefits add up to why you should consider investing in real estate.
Avoid these bad budgeting mistakes
The financial decisions you make (or don’t make) today will inevitably affect your future. Good budgeting practises now lead to a more financially secure tomorrow and bad financial habits can sink your future into debt.
Whatever your negative habits are with money, you can change them. It can be hard to break lifelong patterns but knowing the common bad budgeting mistakes will reduce your odds of making them:
Bad Budgeting Mistake 1# Not writing down expenses
It’s impossible to stick to your budget if you don’t know where your money is going . It’s very easy to forget the small things such as a parking receipt but over time these things can eat into your budget.
The easiest way to remember everything you buy is to update your budget regularly, every day if you can while your purchases are still fresh in your head. You could also make a note in your smart phone to enter in as you go! or make all your purchases with the same debit or credit card and keep track online through your bank app.
Mistake #2 Impulse Buying
Chocolates at the service station, takeaway coffees at your local cafe and checkout items especially if made weekly add up quickly as well. These seemingly inconsequential purchases like chocolate once a week, are costing you $8 a month, or almost $100 a year. Writing down even those minor $1 purchases every time can help you spend more wisely in the long run by seeing the bottom line effect they have.
Mistake #3 Busting the budget
Blowing the budget happens. You go out for dinner that turns into drinks after. You go shopping expecting something to cost a certain amount of money that you’ve budgeted for – but it’s more or you buy additional items. And this happens a lot but how?
These things do happen, however, if you know that you have a tendency to buy more than just one thing when you go to the store, or if you know that your friends have a tendency to change their plans, either avoid these activities or create a bigger budget for them ahead of time.
Mistake 4% Setting Vague Goals
Saying “I’m going to save” without determining how much by what time frame won’t set you up for success. Set some realistic goals with a specific and detailed action plan. For example, rather than saying you’ll save money, say that you’ll increase your superannuation contribution by $1,500 a year. Instead of saying you’ll spend less, say that you’ll cut $30 a week from your grocery bill or limit yourself to one takeaway coffee a week.
Mistake #5 Making things complicated
Budgeting doesn’t have to be hard. You don’t need to create an elaborate system or use special budgeting tools to develop a realistic spending plan. You can simplify your budget by easily keeping a running total of your expenses using your smart phone or even an excel spreadsheet while having the freedom to update and adjust your budget regularly.
Correcting these mistakes will help realign your budget and financial goals. You can find more helpful budgeting articles from our previous blogs here:
4 tips to change your financial life and make it stick
How to break the cycle of debt
How to take control of your money now
The easy ways to conserve energy in your home
Saving on energy is certainly a trending topic and more than ever consumers are needing new ways to save. The good news is you don’t have to overhaul your home to make it more energy efficient. There are many simple things that you can do with a small amount of money to save energy at home.
Here’s our 5 top ways to get you started:
1) Full Loads
Only run your washing machine, dryer or dishwasher when they are full and use energy saving settings where you can. By not using heat setting on your dishwasher and washing machine you can save as much as 20% on your electricity bill
2) Turn off when not in use
Did you know that 75 percent of the electricity used to power home electronics is consumed while the products are turned off? And 6% of our nation’s energy consumption is from these unused appliances? (according to a Berkeley University report 2015). Unplug appliances and electronics when not in use to instantly save energy, or for a simpler way, plug your appliances into a power strip that way you only have one power source to remember to turn off.
3) Energy efficient appliances
If you’re in need of some upgrades, especially when it comes to every day appliances such as toasters, kettles and other low cost items switch to energy efficient ones. Same goes for refrigerators and washing machines. Most new appliances come with an energy star rating and can use up to 50% less energy than your old appliance.
If purchasing a new home or renovating, when choosing your toilet, appliances, showerheads, and tap mixers, look for fittings that have a high WELS rating. A 3-star rated showerhead only uses around 6-7 litres of water per minute, while regular showerheads can use up to 25 litres per minute. The money you save on electricity (and water) will make up for the cost of your new appliance!
4) You don’t live in a lighthouse
An oldie but a goodie… remember to turn lights off in unoccupied rooms, something we tell our kids! When replacing bulbs, use energy-saving fluorescent lights for areas of the home that need constant lighting. Fluorescent lights are often brighter than regular lights so you save energy. Using these type of bulbs will save about $30 over its lifetime and pay for itself in about 6 months. It uses 75 percent less energy and lasts about 10 times longer than an incandescent bulb.
If purchasing or renovating a home, go green by installing large windows to bring in natural sunlight and save even more!
5) Keeping cool (or hot)
When the hot weather arrives people usually either open their windows and doors for relief, or those who close up in the early morning to protect against the heat.
If your home is well insulated closing up will save on air-conditioning and energy costs. If it’s poorly insulated it will be better to open up. Either way, you’re best opening up some windows and doors to let your home cool down naturally overnight.
Simply by circulating air, freestanding or ceiling fans can make a huge difference to your comfort and your energy bills in hot weather.
There are many conserving resource websites out there when it comes to designing or renovating your home as well. Making a few small changes to the way you use energy could make a difference to your next energy bill. What could you do differently to conserve energy and save money?
Top tips for renovating for profit
Renovating for profit isn’t as straight forward as a coat of paint and adding instant value to your property. Real value means time and money invested. We have other blogs about what to actually renovate to increase value in your home which you can find here but this blog is our top tips to set you up for renovating success.
Especially if renovating is new for you or out of your comfort zone or skill set, put your personal style aside and research the improvements that are most likely to add value for your particular home, your area and the current property market. Put your money into what people value based on these criteria. Remember making money renovating isn’t about your personal style but on your target audiences needs.
Cost blow outs renovating undoes all the value add you were trying to accomplish for your property, not to mention cash flow issues and being able to complete the renovation. Before any purchases, make sure all renovation costs and a buffer for blow out allowances are accounted for. Many trade stores have experts who can help you estimate costs and draft a budget for you.
3. Make it Simple
It’s not always the major bathroom and kitchen renovation overalls that add value to your property. If your budget is tight, there are still many low cost improvements that could still increase your properties value. Instead of a total bathroom overhaul, new paint and bathroom fittings could work. New light fittings, new door and window handles, new floor coverings.. the list goes on that can help rent or sell your property for more by the look and feel and updated style of your property.
Having a network of renovation experts can assist you greatly in saving time and money. Developing relationships and rapport with painters, electricians, plumbers, roofers and even cleaners will ensure they do the best job on your renovation.
Renovating for property may look easy on those reality tv shows, but it is a skill that needs practise. Research shows that to maximise your renovations, as a property owner looking to profit, every $1 you spend on the renovation should return $2.
So your home loan has been rejected. What now?
With recent changes to lending requirements and banks sharpening their pencil in regards to the amount of investment and consumer loans their allowing, it’s now becoming harder than ever before to achieve finance.
If you’ve been rejected for a home loan don’t panic! Different lenders have different criteria for mortgages, and one rejection doesn’t mean that you won’t be able to buy a home.
Here are some simple yet effective steps that can assist you getting back on track and achieving a successful outcome on your next application.
1. Ask why you were rejected
Your lender should be able to tell you the reason/s why you were rejected, which will give you the opportunity to change and fix things before your next application. It could be something simple that you missed!
2. Review your options
Create a plan before applying again. Research different home loan lenders – the more you know, the more informed you’ll be to make the best decision on who to partner with to get approved.
3. Check your credit profile
Sometimes lenders decline because of your credit history. You will need to solve any outstanding issues with your credit file before applying again. If you do have late payment, missed bills get your finances in check and have reasons to explain your financial history to your next lender. For the future, ensure you pay bills on time and develop a regular savings plan. The more reliable you are financially, the better you will appear to future lenders.
4. Review other debts
If the reason you were declined was credit card or other debts, look at consolidating or clearing your debt before undertaking any new loans. Reducing your credit limits or even cancelling cards can go a long way in the eyes of your future lender.
5. Don’t give up
Only those who give up fail!
Always try again, there are plenty of lender options out there. There’s bound to be one that matches your budget and needs however you may need to change your expectations in terms of what you can realistically afford in repayments and what you can borrow.
If you are rejected for a loan the key is not to panic. Loan rejection isn’t uncommon and it certainly doesn’t mean you will never be able to secure finance. Provided you show you’re a reliable financial customer with a good credit history and a sound savings strategy, you shouldn’t have too many difficulties obtaining finance.
6. Appoint a broker
I still believe that finance brokers are the best option currently for securing finance. A good broker’s knowledge about the mortgage landscape, current stipulations with different lenders and suitability to your personal circumstances can prove invaluable when trying to access funds. Please as you continue to build your portfolio the broker becomes an advisor on your journey aware of your personal lending history, needs and ultimate goals.
It can be confusing what type of mortgage to get. It’s not only important to check the right rates for you but make sure you’re getting the right features in your home loan.
At CPG our brokers work for you and help whether it’s a simple rate comparison or a full financial health check – talk to one of our brokers today
Moving house can be the answer to streamlining your finances
Moving house is an exciting (and stressful time) but did you know it is also a great time to make financial changes too?
For the start of 2016 when a lot of us are moving house, let’s look at some easy ways you can kickstart your finances using your house move…
1. Use this time to get organised
Take this opportunity to set up your bill pay systems. Create a dedicated shelf, section, or whatever works for you in your office to sort all your bills and receipts. Something as simple as files can keep your financials organised.
2. Go paperless
Reduce the paperwork in your life and get your bills sent electronically instead of by post? Instead of updating your new address, ask to be sent your bills via email. This way it’s great to avoid late fees as it’s sent straight to your inbox.
3. Supplier review
Moving house is the opportune time to review your utility suppliers. It’s easy to find rates and quotes for your gas, internet and other suppliers to make sure you are getting the best deal possible for your needs.
4. Bundle your Insurances
Just like your utility suppliers, reviewing your insurance needs such as home and contents and even bundling your insurance with one supplier can offer better rates, less contracts and saving money.
After the move is a good time to set up automatic payments/direct debits of your new bills so you’ll know exactly when money will be deducted from your accounts. It makes it easier to budget too!
Most of us don’t need multiple savings, checking and separate accounts. Especially if moving in with a partner/spouse now is a great time to review your accounts and look at removing or combining some saving on fees and being able to keep track of your money easier.
Making the most of your big move by organising your finances will give you one less thing to worry about in 2016. Let this new start in a new home inspire you to get on top of your finances and take control for a great fresh start.