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These funds can later be withdrawn for a home deposit, including any earnings the deposits have made.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.
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.
How to find and buy distressed properties
With the recent changes in economic times there are currently a growing number of distressed sales on offer around the country. So if you’re in the market for a home or property investment, a distressed property is a great option to potentially offer you instant equity and the ability to pick-up a great deal.
So how to you locate, determine and select distressed property opportunities? The key is knowing what to look for!
Here are some tips to finding and securing a distressed property:
Make sure you’re pre-approved
Distressed properties usually have a lot of demand from buyers so make sure you have your finances in order. There are a few pitfalls to look out for when seeking pre-approval. For example if a house is too damaged, lenders will often refuse to finance the purchase.
By having a larger deposit or extra cash to cover repair expenses it can assist to increase your negotiating power.
Find an experienced Agent
Distressed properties can often come with a range of unique conditions, so it’s a good idea to deal with a real estate agent who has experience with distressed properties.
These agents can assist you with the paperwork complexities and offer advice with getting adequate home inspections and conditions.
Finding a motivated seller
Distressed properties generally means the seller is being made to sell in an urgent timeframe. Divorce, death of a relative, job transfer, and serious financial distress are some of the reasons an owner may need to sell and fast.
Many of these sellers may want to sell themselves “for sale by owner”. Dealing direct with the seller means you may be able to find a win-win situation and a great buying price without the costs and time using an agent.
Distressed house vs distressed neighbourhood
Buying a distressed property in a good suburb can be a great deal, as the saying goes buying the worst house in the best street as it can be a quick way to build equity as the house increases in value.
However buying a distressed property in a neighbourhood that’s filled with foreclosures or a depressed neighbourhood could lead into potential problems like long rental vacation periods and a market that make take a long time to bounce back.
Be prepared for repairs
Many foreclosed homes could be left empty for a long period of time or have been left with damage. Be prepared to have a budget for repair work and even get some quotes from building and repair contractors before making an offer.
Distressed homes sometimes aren’t an easy property purchase. They are usually sold “as-is,” need extensive repairs, and require a lot of time and paperwork. However the upside in equity and rental opportunity can be worth it.
Do Smart Investors Finish Last?
Intelligence and knowledge are essential ingredients to being successful with real estate and investing.
However strategies, plans and research are usually not enough. Other factors can get in the way of “winning” at the investors game.
Here are 4 ways a smart investor can win.
DON’T buy with emotion
It’s essential that you treat investments for what they are – assets that are there to make you money. Completing your due diligence and calculating projected returns on every potential investment is the only way to minimise risk and maximise return.
If you can’t learn to tame your own emotional monsters (anger, greed, fear, etc.), you can’t be a successful investor. Even the most amazing strategies won’t save you.
DON’T get stuck in analysis paralysis
Investors can easily get inflicted by trying to find the property that “ticks all the boxes” especially if you are very analytical.
Although it’s imperative to do your research and due diligence, you might find yourself stuck analysing instead of making deals.
The point is that you’ll never make money on a deal you never do. A 95% good enough solution today is better than a 100% perfect solution tomorrow.
DON’T get complacent
All investors can be guilty of this. Once you get comfortable with investing, it’s easy to fall into the complacency trap. You forget about the impact of interest rates, forget about thorough due diligence, forget to review your portfolio regularly and fail to act swiftly in changing markets.
Retain the qualities of beginner investors of being passionate, keen, hungry and involved!
DON’T Underestimate the Power of Habits
Like diets or exercise, successful investing really comes down to self discipline, focus and consistent action. Most of us know what to do, but we just don’t follow through and do it.
Regular habits will lead to the results you want.
The key takeaway: Smart Investors can win.
Real estate is like running a business. If you cut out the emotional elements and remember that unless you profit, nobody else can either.
What does it really cost to buy your first home?
Buying your first home is an exciting step in your property journey, but it can be a daunting one.
According to financial home loan surveys, four out of five future first homebuyers don’t feel well informed about the property purchase process.
One of the main concerned to get informed about is the costs, it’s not just the property you need to pay for.
On top of your deposit, here are 8 costs every first home buyer needs to be informed of:
1. Home loan application fees
When you get a home loan, it’s likely you will have to pay an application or loan establishment fee. The cost of this fee varies on the lender you go with and can be as much as $1,000.
2. Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI) insures your lender against any loss incurred if you default on your home loan and is needed on all home loans when you borrow 80 per cent or more of the property value.
3. Stamp duty
Stamp Duty is a state government tax .It’s usually the largest cost and is based on the purchase price of the property and paid prior to the settlement. As a first home buyer, you could be entitled to stamp duty concessions, but these vary from state to state.
4. Mortgage registration fee
As a first home buyer, you will need to pay an admin charge by the Land Titles Office. This fee is charged for registering the mortgage on to the certificate of title for the property. The fee differs depending on your state from $85 to $125 per registration.
5. Legal or settlement fees
Your solicitor or settlement agent will charge you a fee to carry out the legal work on the property transaction. Be sure to ask about the costs of searches, settlements and disbursements which could be extra.
6. Pest / building inspections
You will be advised to arrange pest and building inspections by qualified inspectors before exchanging contracts. These inspections will ensure the property is not affected by insect infestations and it is structurally sound and is building regulation compliant.
It is usually a condition of the loan settlement that your lender will require all security properties are covered under a building insurance policy.
8. Other costs
There are some other ‘hidden’ costs that you should be aware of when purchasing your first property including:
- Moving costs
- Home and contents insurance
- Council rates and strata fees
Before buying, it’s wise to work these additional costs into your budget, so you know what to expect and know how much you can spend on your first home.
Is it your time to become a first home buyer?
Our wealth creation and finance specialists will sit down and go through each step of the process in a simple and easy to understand manner presenting you with options.
Why People Struggle in Retirement?
Recent research has found that 95% of working Australians are not financially prepared for a comfortable retirement and a significate number continue to delay planning for life after work. There is usually a gap in what they envisage for their retirement and what the reality is.
Around 87% will be dependent on welfare so if the pension age is increased to 70, many of us will need to consider working longer to have an income and build more retirement savings.
Think you’re too young to start worrying about retirement? Decisions you make now regarding life style and financial choices will make your retirement what you want down the track.
Whether it consists of golf club memberships, living in your dream home or luxury holidays, here’s our top tips to ensure you’re retirement ready:
Think about retirement when you think about saving
It really does pay to start thinking about your retirement when you save today.
Although in Australia if you’re employed a percentage of your income is paid to prepare for this, it’s not always enough for your future needs. The more of your income you set aside for retirement, the easier it’ll be to retire comfortably. By saving early you can ensure your retirement benefits from the value of compound interest.
Have a plan
When it comes to retirement most people don’t have a plan or retirement strategy. The success of this plan is the cumulative effect of the small steps and decisions you make each day.
By evaluating this plan, you may need to adjust your lifestyle choices of today to make it a realistic one. Living a champagne lifestyle today may get you a beer budget come retirement.
What age will you retire?
Do you know how many years your retirement savings need to provide enough income for? These days it can be safe to assume that many of us will live to the age of 90 or beyond.
With many of us wanting to retire in our 60’s, there is usually a big difference in the age people say they want to retire to when they actually do.
Insurance is important
Taking out insurance to protect your retirement plan is an important part of your strategy.. There are many types of insurance that should be considered include life insurance, health insurance and long-term care and can make the difference between a comfortable retirement or financial stress and worry.
The exciting part of getting ready for retirement
When transitioning from work life to retirement, we work less and play more. It’s more than just money we’ll need, but the reality is all retirement dreams need money — to a degree. Thinking about things like relationships, health and a life that engages your interest and fulfils you can help you save more.
Once your financial goals are in place and your retirement plan filled with motivating interests, you’re find yourself one step closer to a comfortable retirement in all areas!
Want to retire earlier? Do you know how much you need?
If you need assistance is creating a retirement plan and strategy, contact one of our wealth creation specialists today. They can help you create what you really want; a financially secure future, a retirement to look forward to and to enjoy life’s luxuries along the way.
Start your plan now
Investing in a slow market
It seems every property expert, blogger and real estate agent are talking about nationwide slowing of the property investment market. With banks tightening investment lending, higher rental vacancies in some areas and sluggish growth, the market seems to be making a polar shift from the previously enjoyed golden years of the last decade.
However slowing markets are not a bad thing and should be considered as opportunities rather than the doom and gloom approach taken by the media. One thing you can always rely on is that markets will rise and markets will fall. The timing is not always an exact science, however historical trends paint a consistent and somewhat reliable picture of what we can expect in the future.
Today, we consider the keys to help you adapt, thrive and take massive leaps forward in a down market.
1) Don’t Panic
One of Warren Buffets most famous lessons he shares is don’t panic when everyone else is. Investing is thinking with your head not your heart. Keeping the perspective that this is a long term game will help you overcome the short term downs.
In a down market there is allot more opportunities on offer and allot less competition vying for them.
2) Change your expectations
it can be hard to accept things are slowing and the unknown of when things will turn back around. The sooner to adjust your expectations of the current market and your returns, you can refocus on the opportunities this type of market can bring instead.
3) Don’t stick your head in the sand
Maximising your investing result in a slow market is best achieved when you have fully educated yourself to the market and trends. There are always hot spots and opportunities, you just need to know where to look. By researching smarter you can find and negotiate below market value property bargains and strong returns. Even with banks tightening their lending there are still options out there including government subsidiaries such as the National rental assistance scheme, distressed developer sales and flip opportunities.
4) Try a different strategy
Many investors in a slow market are trying a new property investment strategy. Experts have reported an increase of investors looking for “value add” opportunities, such as renovating, subdividing or even land with future rezoning potential.
Overall the property investment outlook in Australia long term will remain favourable. With our enviable conditions such as extremely low interest rates, low unemployment levels and growing populations, we remain one of the best countries in the world for real estate investing. Focus on seeing the property cycle downswing as an opportunity to pick up a great deal and get ahead rather than a time to batten down the hatches and wait for the storm to pass.
Going from home owner to Property Investor
If you are currently a home owner getting ready to take the leap toward your first investment property, there a number of important differences you will face when stepping from home buyer to property investor. Property investing can be a completely different ballgame with different rules, lending and requirements.
Here are some important factors to consider when jumping from your PPOR into an investment property for the first time.
1) The right loan
Property investment loans come in many different shapes, sizes and options, such as interest-only repayments, principal and interest etc.
Interest only are generally the most popular with investment lending. This means your repayments are for the interest portion of your loan only, and not the principal or the purchase price. This allows you to maximise your cash flow and are tax deductible, whilst not paying down the original debt.
2) Your deposit
Again your deposit requirements vary greatly depending on location, risk rating, rental return and valuers comments. With their recent changes to investment lending nationwide you will generally need a 10% deposit in most locations.
This amount will vary depending on the cost of the property and the terms of the loan. If you don’t have enough for a cash deposit, you may consider using equity from your home as security for your loan.
3) Using Equity
if you’ve owned your home for 5+years, there’s a chance you have potential usable equity, and this is a valuable resource when it comes to property investment.
As an investor you can generally access up to 80% of your home equity (without the need to take out Lender Mortgage Insurance).
Alternatively some lenders will lend up to 95% of the property value less the existing mortgage, where LMI would be paid on the amount borrowed over 80%.
4) Other Options
funding from family members has become a popular option, such as a parent or a sibling who guarantees your loan. They must have enough cash or equity to cover the minimum deposit requirements of the purchase price of the investment property. Having assistance can make it easier and quicker for you to get started in property investment.
There are many other things to consider when deciding if buying a second property is right for you such as cash flow, estimate rental income and allowing for a safety buffer, which I will cover in my next blog.
If you are able to answer what deposit you need to buy an investment property and know how you will fund it, you can start exploring the different loan and repayment options.
We have registered brokers available to have your questions answered with a free no obligation financial health check. Click here to find out more.
Investing tips for the self employed
Running your own business or being self-employed is becoming more and more popular with investors and entrepreneurs alike. I often hear the common misconception that being self-employed can be a barrier to owning property. However this is not always the case, even though there are usually extra hoops to jump through with the banks, with a bit of forward planning you can successfully secure home and investment loans.
Here are my top tips for maximising your ability to invest.
1. Supplying full financials
You need to be organised and up to date with tax returns as most lenders require the past two years worth of tax returns. This will show lenders a consistency of income. Banks want to see that the business has been maintaining a level of income that is suitable to meet their minimum servicing requirements for the loan.
By being able to provide these tax returns, means that you could potentially borrow up to 95 per cent of the property’s value. It gives the self employed person the best possible chance of having a loan application approved
2. Supplying your business activity statements (BAS)
Some lenders allow self employed applicants to apply for a home loan by providing 12 months of BAS statements.
A disadvantage of applying for a loan using your BAS statements is that you may only be able to borrow a maximum of 80 per cent of the property’s value.
3. Build up a savings history
By having a solid savings history of at least 6 months it can work in your favour for applying successfully for a property loan. By showing you can regularly save you increase your chances of passing the banks strict loan serviceability criteria.
4. Consult a home loan expert/accountant
Prior to applying for a home loan consult an investment property specialist mortgage broker – http://www.crawfordinternational.com.au/professional-services This way you’ll have a clear idea of how much you can borrow and from which lender/s, before you even begin the process.
With their help you can establish what taxable income level you need to apply for the requested loan to confirm your borrowing power and eligibility for finance.
Keeping good records is important for self-employed people looking to buy property, so when the investment opportunity comes, you are ready to capitalise on it.
Investing through Financial Hardship
As a property investor it’s highly likely that you have or will experience financial hardship at least once during your investment journey. These times of stress and hardship can be caused by many factors including, market fluctuations, periods of rental vacancy, increases to outgoings & maintenance or even a substantial change to interest rates.
While such periods are never comfortable and can take the fun out of a once high performing portfolio, it’s important to know that you’re not alone, that such challenges are commonplace in property investing circles around the country & there are plenty of options available.
In a lot of cases I see, investors who have sound dynamics in their portfolio often just need temporary assistance to get through the tough period and emerge out the other side.
In Australia, banks and financiers are required to consider offering you flexible payment arrangements during periods of financial hardship. Other service providers, like insurance and phone companies can also provide their customers with financial hardship arrangements for bill and debt payment plans.
The key to accessing these flexible arrangements and payment plans is getting in early. Ideally contacting them to discuss options before you fall too far behind will place you in good stead to work proactively with them to set a suitable and manageable arrangement.
Here are my top tips to dealing with financial hardship:
- Make a list of all the debt you owe. Find out what payments are necessary to bring your accounts up to date so that you have a clear position on what you need to negotiate.
- Get real and assess how long your position will last for. Do you require 3 months, 6 months or 12months of relief? Do you need to plan for longer?
- Are there any other factors that are affecting you?
- Formalise a Budget – To gain a clear understanding about what income you have to work with, what commitments can be made and which need to be deferred. Helpful budget programs can be found online at www………
- Financial arrangements with banks, financiers and creditors can include:* Postponed or deferred payments
* loan restructuring
* interest only repayments
* temporary overdrafts or lines of credit
* entering into refinancing or debt consolidation arrangements
If your financial situation worsens and becomes more permanent other options such as selling property and assets further information should be sought regarding options available to you. It’s always wise to seek advice from a professional financial adviser or from an independent financial counsellor about available options.
There are a number of helpful resources available for further guidance and counselling through tough periods including those below.
- www.moneysmart.gov.auFree budget calculator: https://getpocketbook.com/
For more information about financial counselling services, you can call 1800 007 007 or go to www.financialcounsellingaustralia.org.au
Making it through tough market periods can mean the difference between your portfolio surviving or diving with depositors often required to get extremely creative to survive downturns.
It’s key to remain positive and focus on what you can do during these periods and don’t be afraid to approach your bank and credit partners to discuss options.
Remember they are as invested in your property future as you are!