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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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 YearDepreciation on PlantCapital AllowancesYearly Total
  Low Value Pooling  
23/3/2012 – 20122,6748012,4465,921
2012 – 20134,10113028,95214,355
2013 – 20143,4548148,95213,220
2014 – 20152,9235088,95212,384
2015 – 20162,4878478,95212,286
2016 – 20172,12708,95211,079
2017 – 20181,82808,95210,780
2018 – 20191,58108,95210,533
2019 – 20201,37408,95210,326
2020 – 20211,20108,95210,153

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.