Which One Do You Go For: Rental Growth Or Capital Growth?

house-with-for-rent-sign-posted-in-yardThere are basically two types of property investors on the market today, those who purchase property to sell it, and those who purchase to lease. So, how hard can it be?

Rental properties in the right growth areas provide you with a steady cash flow, and the ability to pay off mortgage at the same time. There are several key factors that have to be considered before a property is called a “good investment”. Among these, you should be able to identify what suits your goals the most, and whether you should go after rental yield, or capital growth.

Often, it is difficult to find both in the same area, as high rental yield properties are often in the outer ring of the CBD. These properties are cheaper than their capital city counterparts, thereby providing you with the most out of the rent. On the other hand, capital growth properties are usually in the inner ring of the CBD and they cost more, but the property value provides the best growth in time. So which one do you go for?

Capital growth properties take advantage of the property value at a lower rental yield. These properties take advantage of the area as it grows in value. Capital growth can take a long time to catch up and the level of competition is higher, as people are willing to invest in the inner ring of the CBD as it is accessible to nearby amenities.

However, rental yield properties provide you with less competition and high rental yields in the mid – to outer ring of the CBD. These properties are ideal for those who want to shy away from more expensive properties near the CBD, but want to take advantage of the growth area. The property values increase in the area as more developments and amenities are constructed.

Once you’ve determined the best property for you, it is best to talk to a licensed financial planner about your goals. This will allow you to choose not only the best property, but the best areas of growth that will match your current financial standing.

Mortgages – Fixed Or Variable?

As property investment consultants and builders of wealth, one of the most common questions we get asked is what sort of mortgage should I go for? Fixed or variable? In fact it is the number one question mortgage brokers around the world get asked by every single one of their clients.

Whilst the crew at Fountain Property Group don’t have a crystal ball and cannot predict the future we can offer a fountain of information when it comes to historical data and information on these two forms of mortgage. All loans, including personal loans, credit cards and mortgages, have their interest rate set according to the prime interest rate that is set by our country’s governing body.

In Australia, this governing body is the Reserve Bank of Australia (RBA). The RBA will assess a complicated variety of indicators and trends to establish this rate. These factors may include, but are not limited to:

  • the employment rate
  • consumer spending
  • commodity pricing
  • labour costs and availability
  • inflation
  • and the Australian Dollar value
  • Variable Loans

The variable loan will be based on the rate that is set down by the RBA. Lending institutions will then add their operating costs and of course profit to the deal. This market is fairly competitive with many options to choose from. Whatever the market is doing, the variable interest rate will follow. If rates increase – so will you repayments. If the rates decrease, so will your payments.

Fixed Loans

A fixed rate loan means that you will know exactly what you are paying from the moment the loan is taken. Whatever the market is doing, the fixed interest rate will remain static for the term of that agreement. This means that whether rates increase or decrease your payments will remain the same. This is a great way for people who need to maintain a budget.

Which is Better?

Back to that magic question. Which is better? Both styles of loan have their advantages and disadvantages. We offer the classic answer, being that it depends on your own personal situation.
Things that you can assess to help you make this decision will include:

  • How much can you afford to pay?
  • If the interest rates were to rise could you afford it?
  • How long do you intend to hold this mortgage for?
  • Does the fixed rate have any controlling factors such as no extra payments allowed or penalties for paying out early?
  • Which way is the market trending?

For more information, have a chat with one of our consultants.

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Finding The Right Mentor

If you are into property investment then you are in it to earn some form of remuneration. Now we are not saying that you cannot be in this industry for fun. We love this industry with a passion.

When you find your passion the work you do to achieve it becomes fun. We enjoy the triumph of guiding our clients through the sometimes murky waters of real estate investment. It is so satisfying to be able to help people grow their finances and see them blossom

If you have ever been to see the likes of Robert Kiyosaki, Pat Mesiti, Tony Robbins, or John De Martini, there is one thing they tell you to do if you want to be successful in any venture That is to find a mentor—someone who you can connect with.

Leaders in Our Field

Fountain Property Group are investment property specialists. We possess over 15 years’ experience guiding and mentoring in this field. Our affiliated mortgage specialists have a huge 24-year span in the industry and are a huge fountain of knowledge.

Our Beliefs

We have an innate grasp on what we believe are the five areas of successful investing.

These areas consist of:

Structure and finance

Asset Protection

Cash flow and tax

Supply and demand

Property management.

As you can see, you must put some thought into your investment strategy before you even think about looking at property or talking to your bank.

Getting your structure and finance right is the single most important step in your journey. Once you have laid a good strong foundation it will be much easier to build your empire.

Where We Differ

As a non-affiliated company we are not restricted by territories such as other agencies may be. But even deeper than that, we have been able to niche our specialty down to what an investor requires from their property agent.

Yes, we are more than able to find you a great property to live in. It will be at a great price, in a great location that is sure to pay huge dividends in your future. All that aside, we are investment specialists and we can serve you all through your journey.

Here is what we offer

We can source your product. We can guide you through its purchase.

We can then expertly manage your property in such a way as to ensure it is best served to set you up for your next investment purchase. How does it get any better than that?

Brokers Responsible For 51.5% Of Home Loans For 3rd Quarter

Brokers have solidified their presence in the mortgage market by becoming Australia’s majority writer for home loans for the first time in history.

A Mortgage & Finance Association of Australia research found that brokers accounted for 51.5% of home loans, up from the June and March quarter, finishing at 49.7% and 49.9% respectively. Brokers are making their presence felt in the mortgage market after being responsible for 67% of home loans from 19 aggregators for the 12 months to September 2014. Because of these contributions, brokers have accounted for $37.7 billion of the $56.2 billion increase in home loans, according to the Australian Bureau of Statistics.

Read more about this on the Adviser website.

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More Lenders, More Instability: RBA

The Reserve Bank has expressed concerns about the growing number of mortgage lenders in the market, calling it a risk to the financial system as it generates more credit into the housing sector.

80% of the home loan market is controlled by the big four banks: the National Australia Bank, the Commonwealth Bank, Westpac and the Australia and New Zealand Banking Group. Smaller lenders are slowly giving them a run for their money as they call upon the government to take the necessary measures to level the playing field. The RBA has cautioned against any policies that will boost home loan competition as this can come at the expense of financial stability, stating that the country has a sufficient stream of mortgage supply.

Read more about this on the Sydney Morning Herald website.

Reducing Interest Using Mortgage Offset Accounts

Mortgage offsetting is a growing payment scheme for home loans today because it gives the borrower the ability to pay the loan by linking it to their savings account. The balance in the account is then used to offset the loan due before interest. This takes out a big portion of the principal loan.

It does sound enticing to some, but there are other points to consider before opting for this payment scheme.

The borrower has to make sure that there is a sufficient sustainable balance on the savings account linked to the loan, otherwise there will almost be no interest savings. This offset account is not effective, as it is the just the same with paying the loan more than the minimum.

Mortgage offsetting is only allowed for variable interest rate loans, although there are lenders who have offered this scheme for fixed rate loans. It is still best to go through the home loan packages with a financial adviser as these are strategies that are only effective if done correctly.

You can read more about this on the Australian Times website.