RBA Optimistic Toward The Housing Sector

The Reserved Bank of Australia is showing optimism as house prices have increased annually by 5.5%. For the month of September alone, home values have increased by 2.5%. The value of dwelling relative to income is also below normal levels – an indication that the Nation is earning enough to purchase property.

People are starting to take notice of the Property Sector, as shown by above average auction clearance rates for the past months. Construction has also been higher than last year, a strong sign that demand for new homes are increasing. Credit growth has been mediocre, but because of low interest rates, people are most likely to take advantage of this in availing home loans.

Read more about this on the Australian Property Investor website.

Boosting the Size of Your Portfolio with Unused Equity

The goal of most property investors is to have a portfolio of sufficient size and diversity that they are able to weather any economic downturn and still have enough assets to generate a reasonable income. This goal is achievable as long as investors understand the fundamentals of the real estate market, and they have some equity in an existing property to get them started.

Start a Real Estate Portfolio with Unused Equity

If you already have a home mortgage that has been running for a few years and the value of your home has increased during that time, you already have some equity. This is simply the difference between what you owe on your mortgage and the value of your home. Depending on individual circumstances, this could be a substantial amount of money, enough to use as a deposit on investment real estate.

Get the Right Finance and Structure for the Best Outcome

If you have one or two real estate investments with unused equity, then you are to be congratulated. You already have a substantial platform on which to further increase your portfolio. However, before you go ahead and make any decisions, you need to make sure that you have the right structure to hold your assets and the right finance arrangements in place.

Interest rates currently are at historically low levels with no sign of an increase in the foreseeable future. This is the perfect time to be thinking about continuing to add to your portfolio, and we are here to assist with advice on how to set everything up to get the most out of your situation. We are Position One Property, an investment property specialist with suitable real estate stock available ready to be recommended to astute buyers.

Buy Where Demand is Just Beginning to Build

We do not limit ourselves to just one area of the housing market, and this is a key point for our clients to understand. While the market at the moment is talking up inner-city apartments that have become expensive as a result, we have equally suitable properties in many others areas where demand is just beginning to outstrip supply.

Don’t Let Unused Equity Just Sit There

Market research shows the growth areas throughout the state, and it is these areas that will provide the demand for rental housing that can turn your stagnating equity into a wealth creating strategy. You need to have enough income to make intermittent mortgage payments in the event that one or more of the properties become vacant for a short time. If you can do this, your equity can be used to finance additional purchases in growth areas.

If all this sounds interesting, contact us to make an appointment to speak to one of our specialists.

How To Reduce The Risks That Cause Financial Failure

There are some life events and circumstances that can derail efforts to achieve financial independence. Some of them are out of our control like natural disasters and accidents, but our society has developed products such as life and health insurance to mitigate the consequences. “Lifestyle” diseases can also be controlled by making better food and exercise choices.

Apply Some Risk Management Strategies for Financial Security

Aside from these unfortunate events, there are other threats lurking that can throw into chaos our attempts to create financial buffers against unforeseen circumstances. What we can do, however, is to recognise these threats and apply some risk management techniques to create a soft landing if it becomes necessary.

Income Protection Insurance is Only the First Step

For most of us, secure and reasonably paid employment is the starting base. Income protection insurance and actively managing your career through upskilling, as well as promoting or starting your own business are some ways to reduce risks in producing a regular income. Understanding how the economy works and watching for changes like Australia’s recent decline in mining income are other ways.

Assuming that your income is secure for the foreseeable future, you could now be working on creating those financial buffers. We recommend always having some cash savings on hand for emergencies, but accept that with interest rates as low as they currently are, the returns are meagre. The only advantage is instant accessibility, which is why you should only do this for emergencies.

Share Market Volatility Deters Amateurs

Investing in the share market is an option, but only if you have the time and desire to learn and understand how it works and how to maximise investments. For most people, shares are a commodity that is best left to experts in this field to manage.

Property Investment has Many Advantages

The property market is the one area that has continued to perform over a long period of time in Australia. It is also one that most people who own or rent their homes are familiar with. No market is completely safe from economic downturns but we have found property to be one of the best vehicles for achieving financial security.

At Fountain Property Group we have experts available to help you select the right type of property for your circumstances. We will also arrange professional property managers who will select the best tenants and look after the ongoing maintenance.

Good Property Management and Insurance Cover Mitigates Risk

Landlords’ protection and home and contents insurance policies will protect your asset from unforeseen events. With industry-best property managers handling the day-to-day details, you will hardly need to lift a finger on your journey to financial security. Whether you are looking for capital growth, high rental returns or a long-term strategy, we can assist you.

Retain Your Quality Tenants With A Well-Maintained Property

To attract quality tenants, owners must be prepared to keep their properties in good condition. Gone are the days when tenants were desperate for a roof over their heads and would accept sub-standard accommodation. Tenants now are often looking for long-term rentals and expect that, in exchange for their rent and care of the various properties, the owners will keep them well-maintained.

How Investors Keep their Holdings in Good Condition

For owners with a number of rental properties this can pose a problem, as these days, very few of them would be expecting to do any of the cleaning or maintenance personally. They usually have no emotional attachment to their holdings, as they are a means of building wealth over time and are treated strictly as an investment.

This is an area where we have considerable expertise. With many years of experience in real estate and financial planningFountain Property Group has experts in accounting, legal and finance to help you select the right property to suit your investment portfolio.

A Good Property Manager is a Priceless Asset

All our pre-selected properties are in great locations and in excellent condition. Keeping them that way not only attracts quality tenants but also builds equity ready for the time the owners decide to convert their investment to cash. This is where having a hard-working, professional property manager begins to bear fruit.

Property managers deal with all the issues that occur during a tenancy on behalf of the owner. They screen new tenants, prepare tenancy agreements, conduct regular property inspections and generally perform all the administration tasks on behalf of the owners.

Cleaning and Maintenance Maximises the Value of the Property

As far as maintenance is concerned, it is the property manager who alerts the owner to any issues needing attention. Perhaps the interior needs cleaning or even painting. Window or floor coverings may have reached the stage through normal wear and tear, where they should be replaced. These maintenance tasks will need to be done to maximise the value of the property.

Everyone Should Feel Safe in Their Homes

In these times of opportunist crimes, good tenants expect their safety to be of concern to the owners. Most private dwellings these days have security measures in place, and tenants expect nothing less for their homes. An investment in security screens, doors, locks and external lighting will be appreciated by those tenants that investors want to retain.

All of these issues can be handled by a property manager under authority from the owners to manage a pre-agreed budget. Holding investment properties through our company is a truly hassle-free way to create the wealth needed in retirement to live a comfortable lifestyle.

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Mortgage Repayments – A Different Approach

Everyone with a mortgage looks forward to the day when the last payment is made and this financial commitment is no longer necessary. Whether the mortgage is over the family home or an investment property, the euphoric feeling is the same. With it come new possibilities as the money that has been set aside regularly for this purpose is now free to be used for something else.

Use New Strategies to Control your Mortgage

For many people this comes at the end of a long process, taking years to get to this point. How great would it be then, to take a different approach to mortgage payments, and look for ways to not only cope better, but even to shorten the duration by getting in front when it is financially possible?

By taking greater control over spending, and looking for ways to be smarter with your mortgage payments, you could even be in the situation where buying an investment property is possible. With some equity in your home, reasonable employment prospects and a good credit history, our people at Fountain Property Group could be starting you on the road to serious wealth creation.

First Things First

Let’s put first things first by offering some suggestions to better manage your current mortgage payments. Interest rates are at their lowest since the 1960s, and current indications are that they will remain low for some time. This is a great opportunity for a mortgagor to calculate repayments at a couple of points higher than their current commitment, and pay this amount off the existing mortgage. If rates do go up, you won’t notice it and you will be getting in front with every additional dollar you pay.

Don’t Waste Financial Windfalls

Often, situations occur that give us unexpected access to lump sums of money. The most common example is a tax refund, but it could also be a small lottery win or an inheritance. Most people with a mortgage spend these windfalls on consumable items, but with a little self-discipline, these could be applied to the mortgage.

Make More Frequent Payments

If your mortgage lender allows, making more frequent payments will reduce the term of your loan considerably. For example, paying a mortgage fortnightly instead of monthly will save thousands in interest payments by using simple maths. There are only 12 months in a year, but there are 26 fortnights. By paying this way, you are effectively making 13 monthly payments annually.

Save More and Spend Less

The suggestions that most of us don’t want to hear involve spending less and saving more. We are not suggesting that you withdraw from society, but some short-term pain ploughed back into your mortgage will put you in an excellent position in a few years. That investment property could well be within your reach.

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Getting Into Property – An Alternative Approach

There has been much media comment lately about the Australian property market, much of it focused on the high prices being paid, especially in Sydney and Melbourne. This media conversation is bemoaning the likelihood that young Australians will never own their own homes like their parents did, and that they are being priced out of the market by investors.

Property Opportunities Available Outside Sydney and Melbourne

Like all such conversations it has some merit, but it is also ignoring the huge diversity of property available in Australia. It also concentrates its argument in two relatively small geographical locations, albeit those containing a significant proportion of our total population. In our other capital cities and large regional centres, properties are being snapped up by first home buyers and investors at reasonable prices.

How do we know this? We are the Fountain Property Group, a one stop solution for people interested in building an investment portfolio. Over the years we have been in business, we have heard many reasons why people think they can’t buy a home. With the right advice, these reasons can all be overcome.

Stable Income and Savings History a Good Start

The first issue is, naturally enough, having a sufficient and stable income that would give a lending institution the confidence to approve a home loan. The next factor is having a reasonable deposit firstly to avoid paying mortgage insurance, and also to demonstrate your ability to maintain a regular savings pattern over time.

Could Tenants in Common be the Answer?

Both these considerations apply equally to an owner-occupier, or to someone interested in purchasing an investment property. Another way to mitigate the risk, should something unexpected happen, is to purchase property with two or more other stakeholders under a legal structure called tenants in common.

If each party contributes an equal amount they become tenants in common in equal shares. If one or more parties contribute a larger or smaller share, they become tenants in common with shares in proportion to their contribution. There are some other issues that need to be discussed, but this is a viable way for people to purchase a home, particularly an investment property.

Good Properties at Affordable Prices in Regional Centres

The other factor that many people do not consider is the location where they want to buy. If it is for a home to live in, obviously that must be near employment. If, however, they are starting a property portfolio, there are many locations throughout the country, other than the capital cities, where they can get started. Wherever there is a demand by tenants for housing, there is opportunity for investors.

This, and other advice such as ownership structures, cash flow and management, is available to our clients at the Fountain Property Group. Anyone with a reasonable debt history and regular income can own property.

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Bringing It All Into Perspective

There is a lot of conjecture out there in the market about the ability of young people today being able to afford a mortgage. After reading this you may just believe that the truth Is – it’s all in how you manage your money in the first place. Surprise! Surprise! Nothing has changed about that in hundreds of years.

Easy Money

Over the years, as the public began to be aware that investing in property was a good thing, a new industry blossomed. Mortgages!

With large tax incentives all round, a bricks and mortar asset to insure against to satisfy your lending institution and you could easily be on the way to having your first – or fifth – or tenth mortgage, often at 100% of the purchase price, sometimes more.

The institutions, whilst still canny with their money, are more than willing to loan money for all sorts of things and this is where the trap lies. Twenty-somethings are investing in loans or higher credit card debt more than ever before.

Most people will be unaware that the repayments on a $20,000 credit card will be around the $600 mark per month. If you have a personal loan for $20,000, for a motor vehicle as an example, you are looking straight down the barrel of a $500 monthly repayment.

Amazing Mortgage Fact

Now check out this last little bit of data.

Did you know that the repayments on a $100,000 mortgage, 4.5% interest over 25 years is just $555 per month? Amazing.

The two debts mentioned above are relatively small on their own. Together, however, they can have a big impact on just how much money you can borrow for a mortgage. A bank will automatically cut your borrowing power by up to $200,000 as soon as it sees debt like this.

This is where Fountain Property Group like to help flesh out the details for you. We see a lot of disappointed faces in this business. It is amazing how this form of debt can reduce your service ability.

When we are educating our clients. We ask the hard questions like …In the short term, can you see the value in catching the train for a little while? To get that extra money for your mortgage is it worth forgoing the stereo or is it worth giving up your trip to Greece? You may answer yes or no to these questions. There is no right or wrong answer. The choice, however, will determine your living arrangements for a long, long time to come.

Is Credit Card Debt Destroying Your Home Owner Dreams

The data that is evolving regarding credit cards is that people are applying for them at a younger and younger age.

One of the greatest flaws in this reporting is comparing the Generation Y’s with older folk of 65 years of age. It has been reported that the average 65 year old applied for their first credit card when they were 34.

This is a direct contrast with the gen Y’s who are usually applying at the age of 20!

This should not be surprising data. In this day and age you can apply for a credit card online. In the “old days” you had to jump through many hoops and wait weeks to get a credit card. Twenty five years ago, the United Kingdom would not even give you a key card until you had banked with your banking institution for six months, let alone a credit card.

Thirty years ago a credit card was considered a luxury. In the now, a credit card, whilst not essentially a necessity is definitely marketed as a way to get what we want immediately, instead of the scrimping and saving of our grandparent’s era.

The alarming data though is the fact that most twenty-somethings have credit card debt of between $10,000 and $30,000! THAT could have been a mortgage for our 65-somethings!

What most twenty-somethings don’t realise is – their credit card debt may exempt them from getting a mortgage and actually creating their own little piece of paradise. The place they can call home and escape the hustle and bustle of today’s modern living.

Fountain Property Group are interested in helping people achieve their housing and investment dreams. We offer some tips to those who really want to own their own home.

Stop Spending!

The first tip is clearly obvious and that is to stop spending or more importantly stop frivolous spending. It is so easy to rack up a hefty debt and have little to show for it. Try cooking and entertaining at home instead of eating out and paying the outrageous drinks prices you do at clubs, pubs, and restaurants.

Ask Whether You Really Need This

Often you can convince yourself that you need the latest mod con. Whatever item it is you are considering going into debt over ask whether you really need it? Could the old one work just as well even though it does not have the latest bells and whistles?

Buy Quality

If you must spend your hard earned cash (sorry run up your credit card debt) do it by buying quality items. Buying cheap usually gives you what you bought – something that will break down faster!

CASE STUDY 2– DON’T DELAY, ORDER NOW

high rise apartmentDelaying your decision to obtain a depreciation report can cost you tens of thousands of dollars worth of depreciation entitlements. We have set out below a case study of depreciation entitlements claimable by a first time investor examining what a delay of 4 years could do to an investor’s cash flow. In December 2016, Paul and Samantha are told of the cost benefits of engaging Deppro to produce a depreciation report. As is evident from the table below, Paul and Samantha’s delay means they missed out on almost $60,000 worth of depreciation deductions from previous financial years.

 

Financial Year Depreciation on Plant Capital Allowances Yearly Total
    Low Value Pooling    
23/3/2012 – 2012 2,674 801 2,446 5,921
2012 – 2013 4,101 1302 8,952 14,355
2013 – 2014 3,454 814 8,952 13,220
2014 – 2015 2,923 508 8,952 12,384
2015 – 2016 2,487 847 8,952 12,286
2016 – 2017 2,127 0 8,952 11,079
2017 – 2018 1,828 0 8,952 10,780
2018 – 2019 1,581 0 8,952 10,533
2019 – 2020 1,374 0 8,952 10,326
2020 – 2021 1,201 0 8,952 10,153

Obtaining a depreciation report at or around the time of settlement of a property can put thousands of dollars back into an investors pocket. This money can be used to either pay down existing debts on investments or drive the investor to re-invest and grow their portfolio.

CASE STUDY 1– 1950’s POST WAR COTTAGE

The common investor purchasing a 1950’s post-war cottage would assume that there is little value in obtaining a depreciation report for that property. As described below, this leads to investors missing millions of legitimate tax deductions each year.

     

Lin and Andrew purchase a post war 1950s home in 2011 for $460,000. Although it does not qualify for deductions for the construction cost of the building (being a pre-1985 house), they can claim the depreciation for the plant and equipment included in the purchase such as the blinds, carpets and stovetops. While Lin and Andrew might think that the plant and equipment in the property should be replaced as a write off, they are missing out on over $10,000 worth of deductions in the first 4 years.

The table below shows example values of plant and equipment in a 1950’s post war home including the mistaken value often attributed to the item by the investor and the real valuation undertaken by Deppro:

Item Mistaken value Value for depreciation purposes
Carpet Write off $2,439
Hot Water System $50 $1,440
Heaters $100 $847
Window blinds $300 $3,727
Outdoor furniture $50 $581
Smoke Detectors $20 $186
Rangehood $50.00 $254
Cooktop $80.00 $423
Oven $100.00 $508
Total $10,405