What do you do if you are young and thinking about investing in property?

A 19-year-old I know has plans to save up to buy his first property, and mentioned that he’s not too sure where to start. Should he do a property course, he wondered? And how do you know where is a good place to buy? Let alone what you should pay.

He’s thinking not of giddily purchasing his first property to live in, but of buying an investment property and slowly, over his lifetime, purchasing some others.

What do you do if you are young and thinking about investing in property?

A 19-year-old I know has plans to save up to buy his first property, and mentioned that he’s not too sure where to start. Should he do a property course, he wondered? And how do you know where is a good place to buy? Let alone what you should pay.

He’s thinking not of giddily purchasing his first property to live in, but of buying an investment property and slowly, over his lifetime, purchasing some others.

We’ve been hearing for a little while now how this is a trend among 20-somethings, and those into their 30s. Buy a place as an investment, often a cheaper unit in a less desirable area, and then tap into the tax advantages of negative gearing (by keeping your outgoings on the property higher than the rent coming in) and either rent yourself in an area you want to live, or stay at home with the baby boomer parents where the board is minimal and the washing comes for free.

So for Jake, and any other young people wondering which way to go, here’s a few tips. And I’m sure readers will offer up plenty more in the comments space below.

1. Ask yourself, should I be investing in property at all, and what do I expect to get from it?

If it’s a road to quick riches you want, then this is not the path to take. Yes, we have seen some huge run-ups in prices over the years, and it’s true that property prices, like the economy, tend to run in cycles, so we will obviously see increases in years to come, even despite the current negativity enveloping much of the globe.

Because property buyers are human, and love to follow a trend, and for some bizarre reason feel more comfortable buying when prices are running hot, there is no doubt there will be price rises once again in the future.

There are a whole bunch of other factors pointing to future price increases too – in some cities the lack of building will keep the supply lower than it should be, the population continues to grow meaning so does demand, and in Australia at least, we remain a wealthy country still experiencing household income growth.

However, don’t bet everything on this happening and by how much prices will go up – instead expect to see, over a longer period of time, steady increases with plenty of troughs along the way as the economic cycle rises and falls.

And now, here’s the cue for all the readers who argue the market is about to tank and that now is not the time to buy property. And with Europe perched on a precipice and the US still in an uncertain state, you do have to question whether the bottom of the market has been reached yet despite the pretty strong fundamentals underpinning the Australian economy at the moment.

However, if you are a young person just starting to save for your first property, you have a bit of time to sit back and watch the market while you save anyway, so don’t fret too much at this juncture.

2. Educate yourself

The mere mention of "property course" sends shivers down my spine. Often it’s run by property spruikers taking hundreds or thousands of dollars off gullible people who are then, at best, fed information they could find themselves by reading widely, or at worst, the poor souls are flogged the company’s own products or services, all with the shiny promise of sky-high returns.

There has never been an easier time to learn the whys and wherefores yourself. The internet has opened up a world of information, and young people wanting to learn a bit more about property should be heading there (to reputable sources) as well as to the property lift outs in newspapers, and better quality magazines.

Want prices? Find them on websites like Domain.com.au or Australian Property Monitors (both owned by Fairfax Media). Want to find the best loan? Check out a loan websites such as ratecity.com.au. And need to know where the market is headed? Read plenty of stories and opinion pieces and rather than taking just one as gospel, glean the general themes from what all have to say.

If there’s a few property terms you don’t understand – such as negative gearing – look them up and get your head around what they mean. That won’t unlock a magical key to property investment for you and land a bag of gold at your feet, but it will stop spruikers taking advantage of your youth and naivety.

3. Take a balanced approach

Property holds a certain glimmer for some young people – perhaps under the encouragement of their parents who prefer a bricks-and-mortar approach. And also because everyone has lived in a house or a unit, but not everyone has held shares or gold or even superannuation.

But if you are young and have the advantage of having your head screwed on the right way and are already thinking about investing, you should be looking at all investment classes impartially. Sure, consider property, but look at it as part of building a balanced portfolio.

Even at 18, 19, you’re not too young to start putting a few extra dollars into super, keeping some of your money in cash in the highest-paying account you can find, and also thinking about a small parcel of blue chip shares to start you off, all while saving to buy your first property. Education, it must be said, can also be considered an investment class in the fact that you are boosting your own potential earning capacity.

And when I say dollars, I really do mean just a few dollars. Even small amounts each week from a meagre income are better than nothing.

This is a smart approach because it lets you spread your risk, and not put everything into the one basket. Sure, this mean it will take you a little longer to save for the first property, but time is on your side if you are young, and to use a cliché, Rome wasn’t built in a day.

4. Save as much as you can before buying

If you plan on being a landlord, you will need to have some extra cash available to cover the loan in between tenants, and also to pay for any repairs to the property. If you are buying into an apartment block or townhouse, you may need also extra money to pay for special levies such as building repairs not covered by the sinking fund (the general fund amassed by the body corporate from strata levies).

So the smart thing to do is to save a good amount of money before purchasing so you’re not taking an uncomfortable risk.

5. Research where to buy

The old adage is buy as close to the city as you can and look for properties that don’t have huge outgoings due to lifts and fancy add-ons such as gyms and pools, but do have the advantage of being near good infrastructure.

Closeness to the city can be good but I would also focus on the infrastructure side of things, and whether or not the suburb has the potential to develop over time.

Buying near rail (heavy or light) infrastructure is always a good bet as the infrastructure will stay there for a long time, and as populations continue to grow and further congest areas, the infrastructure will become even more important.

Do carefully think before buying in areas with inherent negatives, such as heavy flight paths or a lot of noise. Also very busy roads can be a problem – it can be smarter to buy just off them.

Keep your tenant in mind – what type of person would like to rent this and do those people generally live in this area?

Do try to buy something that would be easy to sell again in a hurry if you needed to, should your circumstances change. If a property you are buying has sat on the market for months and months, be sure to find out why and be realistic about encountering the same selling problems if you should buy it.

For that same reason it is good to try to buy something that is around the median price for a suburb, as it should have a larger pool of potential buyers.

6. Keep some cash aside after buying

When you buy the property, don’t sink all your money into the loan if you can help it, keep a good chunk in a flexible high-interest earning account (not a term deposit, as you may need to access it at short notice).

Use this as your maintenance fund, and to top up the property loan if you need to (and for many properties, in the early years at least, the rent won’t cover the mortgage, council rates, strata and water supply charges, so you need to be in a position to pay for the gap yourself).

The cash you keep, though, must strictly be for investment and as a reserve for maintenance and loan top-ups, not for holidays or random spending, as you always need a buffer so you aren’t forced to sell at the worst possible time.

7. After you buy, keep saving

Direct any spare cash to your savings account, not your investment loan. Or if you decide to buy a property to live in, use the cash to pay down your own home loan as fast as you can, rather than the investment loan.

By doing this, you make negative gearing work for you because, by keeping the loan against the property larger, you are paying the highest amount of interest you can, while earning interest off your other money you are keeping in cash.

Or in the case of living in your own property you do want to pay that off as soon as possible to get rid of non-tax-deductible debt.

While I’m advocating not dumping all of your extra cash into your investment loan, it is prudent to pay the property off over time to gradually reduce your liabilities, rather than remain solely focussed on negative gearing.

For that reason, interest-only loans on investment properties may not be wise in the longer term, as you are basically betting on price increases to cover you. Yes, price hikes will probably happen over the longer period but you don’t want to bank your entire savings on them.

8. Get your hands dirty

If you buy a property that needs to be fixed up, and you have time on your side, get in and do it. Many things such as pulling up carpets and painting can be achieved with little experience – you just need to have a go.

You might be surprised at just how much painting kitchen cupboards, tired tiles and old baths can rejuvenate a property.

Do be aware of any dangers that lurk in the property though, such as asbestos, and treat them appropriately. And do call in trades for jobs that are beyond you, such as electrics, plumbing and larger tiling jobs.

9. Be a good landlord

Be prepared to spend on maintenance over time and keep your property up to scratch. You’ll attract better tenants, and your property will also hold its value better. Rundown rentals look shabby and often don’t command a good price come sales time.

10. Take your time before buying again

If you have your sights set on owning more than one property, don’t be in too much of a rush. Keep your investing balanced, putting some funds into other classes such as cash, shares and super.

And when you have built enough equity you can then consider buying a second property. Balance your risk though and don’t get yourself in over your head. You want the power to hold each property for as long as you see fit, rather than be forced to sell should disaster strike.

Story by Carolyn Boyd, a property journalist and keen follower of Australia’s housing market.

Source: www.domain.com.au

The days of only looking for a property through the paper have changed, with the majority of people these days starting their search online and loving the flexibility of being able to set up alerts and notifications so they get told when a property that meets their search criteria becomes available in the marketplace.

Purchasers can first narrow down the number of potential properties they’re interested in through use of criteria such as: location, price, property type, number of bedrooms, number of bathrooms, land size, car parking, etc.

They’ll then look at the results that have been returned by the search engine they’re using and narrow it down further. They’ll do so according to the first impression they get from the photo, heading or first sentence. They’ll only open some of the listings to actually read the description in full and see all the photos.

So my question is this… If you’re going to put in parking into your investment property, which is going to give the best returns? Does having a garage add more value then a carport? And what about a shade sail? Or just a driveway with an uncovered parking space? Are potential buyers or tenants even going to care too much about what type of parking it is, as long as it has some?

The majority will argue that a garage will bring in the highest returns (how much it adds to the value of the property compared to how much it costs to put in), especially if the garage is needed for more reasons than just parking the car.

It’s often perceived as a space with multiple uses. There’s the potential to use the garage as an additional storage space or as a handyman’s workroom. It also provides additional security for the occupier’s vehicles and other belongings.

For some people it can also be an additional living space, like a rumpus room where they might have a pool table, bar, etc.

On the other hand building a garage also costs the most and involves getting plans approved by the council which can introduce additional delays for the project. All in all a new double garage costs somewhere around $40,000 these days inclusive of all costs. And it tends to add somewhere between $50,000 and $70,000 to the bottom line of a property investing deal, depending on the location of the home.

So is it really worth it? If you have that much extra in the budget for your renovation, then it probably is. But not everyone does.

A carport does cost less to construct and still provides undercover parking for cars, however it also requires getting a permit from the council which may cause delays and introduce additional costs. So what does that leave us with?

The shade sail. In some councils having a cover which isn’t 100 per cent solid which is under three metres in height may not require council approval. They still protect your vehicle from UV rays and the higher quality ones can be fairly weather resilient.

They can also look very modern in appearance and are quite often used in new developments and display homes. You can get them for around $1500 to $3400 (3m x 6m) including poles and fittings. Surprisingly they tend to increase the bottom line of a renovation deal more than a standard carport. They tend to increase the value of the home by about $5000 to $15,000.

Interestingly having uncovered parking doesn’t add as much value to the renovation deal as you’d think. Although most people would be happy that a property has some parking they won’t value it as much as any of the other options.

There are exceptions as always and central business districts of most big cities fall into that category where any parking at all is considered a blessing.

Ana Stankovic is well known as one of Australia’s leading renovating-for-profit specialists and is regularly featured in prominent industry publications, expos and continually educates investors.

Don’t let the slow real estate market keep you from having the home of your dreams. You don’t have to move, you just need to improve. And this is the perfect time to do so.
Never before have all the stars been so perfectly aligned to facilitate the remodelling needed to give you your perfect palace. Materials costs have been lowered to increase sales, building contractors have reduced their fees to attract more clients, and interest rates are the lowest they have ever been. If you’ve ever wanted to tackle a home improvement task, this is the time to do so.
Here are five good places to start:

1. Kitchen Remodel - If your kitchen is tired and run down, this is a great time to remodel it. Cabinet manufacturers are pricing more competitively, granite prices have fallen, and contractors are itching to work. The contractors that were busy building homes during the housing boom are now fighting each other to get the kitchen remodelling jobs, and the homeowner is the one who wins. Since it is the kitchen that is said to sell the home, the improvements you make now will benefit you greatly when the market turns around and you put your home on the market.

2. Bathroom Remodel — No longer just a place to shower and shave, bathrooms have been elevated to spa status. If your bathroom doesn’t measure up, this is a fantastic time to bring it up to date. Popular improvements this year include heated flooring, natural materials such as stone and wood, multiple shower heads with massaging jets, higher counters with vessel sinks, and soft colours with mood lighting for that ultimate spa experience.

3. Bedroom Addition — There is always great value in adding another bedroom to your home. Whether you create an ultimate master retreat, a welcoming guest room, or a home office, the extra room will always increase your profits when you go to sell. The long line of craftsmen needed to implement a room addition are all willing to bargain now to get your job. From the architect to the contractor, to the carpet salesman, they are all offering the best deals in years.

4. Decks — Outdoor entertaining is a huge trend with homeowners, and adding a deck is a great way to welcome your friends to the great outdoors. From a simple square deck to a multi-level masterpiece featuring an outdoor kitchen, materials and labour costs have come down to make this an ideal time to take on that outdoor living project.

Story by Barbara Green – http://www.housingwatch.com
Barbara Green is The Design Diva and owner of Sensibly Chic Interior Design. She creates one of a kind interiors that reflect your taste, lifestyle and budget.

Buyers are prepared to pay more for a Melrose Place-type environment.

When good neighbours become good friends, it can not only make apartment buildings much more enjoyable places to live but also boost the price of the property.

One of the key things professional strata record searchers look at in apartment blocks or complexes when they’re examining buildings on behalf of potential purchasers is how friendly, harmonious and happy the residents are.

"That’s definitely something that’s included in our strata reports," says the director of I&D Strata Searching, Matt Trachtenberg-Ray.

"What a lot of people fail to understand when they move into strata buildings is that they are moving into a community and the harmony of a building is just as important as how much they have to spend on fixing the concrete."

For as well as such harmony making a building a far more pleasant place to live, with neighbours chatting in lifts rather than enduring stony silences and greeting each other on common property, it also means it’s much more likely that disputes will be settled quickly and amicably rather than through expensive legal action.

"It’s the tone of a building that’s important," says the president of the Institute of Strata Title Management, David Ferguson. "A good building that’s supportive of the social fabric can be like having an extended family and, in turn, not to have a friendly building can be disastrous.

"It’s incumbent on people, and especially office-bearers, to make people welcome and run the building in a positive way. Where a building is known for a good living environment, there’s more demand for apartments and inevitably the competition will force prices up."

That might mean buildings that host book clubs, wine-tasting evenings, playgroups, social occasions, sporting ventures and even – such as in the case of the city’s Highgate building – group holidays in far-flung destinations, such as Yemen.

At the vast Jacksons Landing in Pyrmont, for example, there are Friday drinks, BYO dinners, quarterly meals in local restaurants, tennis, a singing group, dog-owner get-togethers, newsletters and an annual Christmas charity fund-raiser concert.

"A lot of people now know each other as a result of them and it really enhances the building," says Regina Knowles, who organises many of the events. "It creates a very friendly atmosphere, which people love."

Smaller buildings can be just as welcoming. In JoAnn Holloway’s 12-unit complex in Bexley, there’s an affable ambience. In-house dinner parties for residents are a regular occurrence and everyone pitches in if there’s a problem.

"It makes it a very happy place to live," Holloway says. "Occupants are always happy to help each other with chores, like moving furniture, gardening and even rescuing washing from the clothes line if it rains.

One elderly resident often passes on home-made biscuits and enjoys having a chat, while one time, when I was sick, a neighbour immediately offered to help and dropped off a meal. It’s wonderful."

It all comes down to attitude, says the vice-president of the apartment owners’ peak group, the Owners Corporation Network, Brian Wood. If people say hello when they pass each other and engage rather than ignoring each other, it oils the wheels of a building.

"A good atmosphere in a building is completely fundamental," he says. "If you have a good relationship with other owners, then you’ll get disputes or problems being resolved sensibly and practicably rather than escalating stupidly."

Indeed, friendliness is the very reason that Robert Dodds recently decided to buy into the Motto building in Erskineville. He was happy to buy a one-bedroom apartment for $510,000 – $20,000 over the reserve – because he has friends already in the building who say it’s a very sociable place to live.

"During inspections I got the feeling that it’s a bit like Melrose Place," says Dodds, in reference to the American TV show about the comings and goings of people in an apartment building.

"I liked this apartment’s big balcony, which will be great for entertaining, but the residents seem to be young professionals who are all pretty outgoing and friendly. It looks like a great place to buy into."

Midday at the oceana

On a sunny weekend, there can be any number of residents socialising over a glass or two down by the barbecue, cabana and pool at Elizabeth Bay’s 65-unit apartment building Oceana.

"It’s just a very friendly building, with great amenities, which we all share with goodwill during warmer days," says Ross Appleton, who’s lived there for nearly four years.

"We’re a diverse group of demographics and age groups but we do interact well and socialise with each other."

There are many formal, organised activities but, every Christmas, everyone gets together over drink and food. And after each AGM – instead of, as in some buildings, trying to tear each other’s throats out over disputes – everyone socialises, with wine, beer and nibbles laid on.

In addition, if there are any major issues happening, such as the proposal to extend the nearby Elizabeth Bay marina, nearly every resident is happy to sign a petition. "If there are any disputes in the building, the sociable, friendly atmosphere enables us to work out a way around it," Appleton says.

Oceana chairman Paul Johnson says it was a deliberate strategy to create a cordial feeling throughout the building. "We wanted to help people communicate more and it’s often much easier to raise issues when you’re talking over a beer," Johnson says. "It works very well."

Ice-breaker at horizon

Having a concierge in an apartment building often provides a pivotal point for residents to get to know each other, says lawyer Richard Gration. At his building, Darlinghurst’s Horizon, people will often stand and chat to the concierge and others will join in, helping to create a friendly atmosphere for everyone.

"The concierge is a significant factor in pulling people together," Gration says. "It’s almost an ice-breaker that gives people the ability to make contact with one another.

"We also have regular organised social functions for residents, especially designed to facilitate neighbours meeting each other. They are always very well attended, with around 80 to 100 people."

One resident paid caterers out of his own pocket for cocktail food while, for Horizon’s 10th birthday, a penthouse owner opened up his $15 million apartment for a function, which was attended by about 150 residents. There are also discussions happening about a tennis day on the complex’s court.

"A friendly atmosphere also means that the number of neighbour disputes tends to be a lot lower than that you’d expect from a building with 260 apartments," Gration says. "People feel they can talk to one another like adults rather than rushing off to the courts or to the CTTT."

Playgroup the key at Pacific Place

Enterprising apartment residents at one north shore complex have set up a playgroup to enable parents and toddlers to get together in a novel experiment to ensure a friendly atmosphere.

"This is great," says mum Linda Prankerd, watching her daughter Alexandra, 1, play with her little friends from neighbouring apartments at Chatswood’s Pacific Place.

"I’ve lived in quite a few complexes but people here have worked really hard to make this one extremely friendly."

The chairman of the 221-unit Epica building in the complex, Gerry Chia, organises an annual social that has now expanded beyond his building to include all four of the strata’s on the site. There’s also been a tai chi group at the complex, a card club, quilting club and all manner of social activities.

In an effort to increase the range — and allow the playgroup to meet even in wet weather — all the residents are now chipping in to pay for a community centre to be built at the complex.

"I think many people expect apartment buildings to be soulless places and that they’ll be lonely in high-rise," Chia says. "But that’s certainly not the case here. Of course, not everyone wants to be social but we’re ensuring it’s friendly for everyone."

Story by Susan Wellings –www.domain.com.au

Many people invest in apartments because they often have a cheaper buy-in price than houses and are also thought to be a lot easier to maintain without gardens to worry about, and with the costs of building maintenance shared across other owners.

But what makes a good investment unit?

Location, location

You can’t get past the fact  you need to look for an apartment in a good spot. In the city, walking distance to public transport and shops is a must. Nearby schools can be handy but many renters are single or young, childless couples, so a school nearby is probably going to be third on the list after a train or tram station or a very reliable bus route that is here to stay, and shops, cafés and other services. Buyers agents say you should look for a quiet side street rather than a busy main road.

Many renters are professionals who want to get into the city fast. For that reason, apartments closer to town are recommended over those on the outskirts by many buyers agents who argue they will attract higher capital growth. The downside is they often cost more to buy than units further out.

An apartment in an area where there’s high development and plenty of other similar flats around would probably grow in value more slowly than an older unit in a pre-1980s building. That’s because at sale time there could be stacks of similar new flats on the market but a well-built, well-located older unit will be a scarcer find.

Amenities

You might get away with a shared laundry (although internal washing facilities are better) but you will definitely want to look for a place with a car space. It broadens your likely tenants, and also, when it comes time to sell, gives you a valuable marketing point.

Big or small block?

Apartments in large complexes tend to have higher running costs because there are often more facilities, such as lifts, gyms and pools. Therefore your strata fees will be bigger and your rental return or yield (calculated as your annual rent divided by your purchase price, multiplied by 100 to give a percentage) could be lower. That’s one of the reasons many buyers agents tell investors to look for older-style three-level walk-up apartment blocks.

On the flipside, proponents of newer apartments argue they can attract a higher rent, and will be let faster as they are more attractive to tenants. In NSW, the Government has also recently introduced incentives to buy off-the-plan apartments. There’s also the higher depreciation benefits that can be claimed from a newer building, simply because they have more plant and equipment in the building that can be depreciated, which some investors find very handy at tax time.

If you are tossing up between an old and a new apartment, you really need to look at rental yields of other units in each block, and also the capital growth history of apartments in each block. To do this, you can ask the agent for figures they may have, search sales and rent history online or consider purchasing reports from research companies such as the Fairfax-owned Australian Property Monitors.

Outlook is important

Most of us don’t want to wake up looking at a brick wall every morning, so it makes sense that the apartments most likely to appeal to tenants and future buyers alike are those that have a nice outlook. Check with council to make sure there’s no developments planned nearby that could impinge on that view.

You’ll also want something that is nice and light and has a decent internal layout – not too poky. Storage can be important in units where space is at a premium so that’s another factor to consider. If there is not enough stow-away space, you might consider adding a bit extra once you take possession if you can squeeze it in.

Sinking fund

For older apartments where maintenance is likely to be required, it’s vital to investigate the amount of money in the sinking fund. You’ll want to make sure it’s enough to cover any big-ticket items such as lift repair, car park resurfacing or painting the building. If there’s not you could be up for a special levy after you buy.

Story by  Carolyn Boyd who is a property journalist and keen follower of Australia’s housing market. As featured on Domain.com.au

Borrowers are unlikely to get any respite from lower borrowing costs for the forseeable future as the big banks continue to replace tens of billions of dollars of cheaper-priced debt at much higher rates.

That was underlined by ANZ yesterday when it disclosed that the new long-term debt it is taking on is costing 20 per cent more than the average price across its $90 billion portfolio of borrowings that extend to the 2014 financial year.

ANZ told investors in London that while funding costs had dropped since the peak of the global financial crisis, pricing remained high and would continue to rise as the bank looked to replace another quarter of its long-term loan book.

Like its big four counterparts, ANZ has been paying as much as one full percentage point more than such debt was costing in the economic boom years before late 2007.

At the height of the crisis and when the federal government’s AAA credit rating was required to guarantee new bank lending, the industry was paying as much as double that to keep wholesale financing sources open.

That situation has eased and the big banks have been able to cut their reliance on government-guaranteed debt – and the price they pay to use it – by using their own AA credit ratings to obtain replacement funding as their borrowings have matured.

Banks have typically borrowed from domestic and overseas investors for two to three years but have been extending these times to about five years to lock in secured funding at fixed rates.

ANZ said yesterday that five years was now the average compared with 3.9 years in 2009, though this would come at a higher cost. At the same time, it had raised 70 per cent of its target of $25 billion for the 2010 financial year, which it estimates it will need to meet customers’ loan requirements in the next year or so.

But the high price of the debt will continue to feed through to interest rates on individual loans such as mortgages, personal loans and business credit, market watchers say.

According to figures compiled by BusinessDay, between now and September next year the banks need to replace long-term funding of the equivalent of $125 billion in pre-financial crisis terms.

Such an amount leaves little scope for loan rates to be eased with the banks looking at any opportunity to pass on higher funding costs to customers.

But after some banks’ controversial decisions of the past two years to increase the price of standard variable mortgages above the cash rate, the big four have kept their increases in line with the rises in official interest rates.

Story by Danny John – domain.com.au

Property investing has become a popular Australian past time with one in ten taxpayers owning a negatively geared property. But just what makes a good bricks-and-mortar investment? It’s not about buying any old house or unit, that’s for sure, and it’s most certainly not about buying something you’d want to live in or even in an area that you necessarily find desirable. Over the next few weeks I will investigate what factors to consider in an investment purchase.

The first biggie is what is better – good price growth, or a high rental return?

There’s two ways to measure your return on investment. Capital growth – the change in price over time – and rental yield – how much rent you’re getting as a proportion of what you paid for the place. Gross rental yield is your annual rent divided by the purchase price, or value, of the property.

Here’s an example: If you bought a flat for $400,000 and you rent it out for $400 a week, you would calculate ($400 x 52) / $400,000. You then multiply that by 100 to get a percentage figure. In this case that gives you a gross rental yield of 5.2 per cent.

People often talk about buying a property with high rental returns. However, most of the professionals who buy property on behalf of investors would advise going for capital growth primarily, and then aiming for a decent yield. Their argument is that just like interest payments left untouched in a bank account, house price rises have a compounding effect when the market is going up. Rent payments on the other hand are generally used to service the costs of owning a property – that is they help to pay interest payments, rates and so forth, and they don’t compound. A bit like if you had a bank account and kept withdrawing the interest payments, it might provide an income stream but you wouldn’t get the benefits of growth on growth.

Generally people who favour high rental yields will be those investors who have less disposable income that they can use to pay the property’s associated bills. They have to have a higher rent-earning property because that’s how they can afford to own it in the first place. People who have more spare cash are more likely to be able to go for a property that has higher price-growth prospects but might attract lower rent.

As a rule of thumb, houses tend to grow in price faster than units. However, units tend to attract higher rent. So units can be cheaper to buy and hold, but may not earn you as much growth in the long run.

Likewise, country properties tend to have higher rental yields and lower capital growth than their city counterparts over time. So country properties can be less expensive to buy and hold, but may not earn you as much growth in the long run.

If you’re in the market for an investment property, deciding what capital growth rate and what rental yield you will target will depend on your own financial situation.

Buyers agent Stuart Jones of Rose & Jones says when buying city investment apartments he targets 5 per cent gross yield and between 4 and 8 per cent capital growth, combining to give  total target returns of between 9 and 13 per cent.

For city houses, Jones seeks gross yields of between 3.5 and 4 per cent.

Jones says it’s important to target realistic returns. "People read stories about somebody who bought a property for $100,000 and then in two-and-a-half years’ time it was worth $350,000," he says. "People chase that but what they don’t realise is it comes off a low base … there might have been something environmental that went on at the time, like a mine opened up around the corner and all of a sudden you know your place is worth more than you would realistically get in a normal market.

"It’s not about finding bargains, it’s about getting a good combination of yield and growth and allowing property to do what it does through the passage of ownership, and that is grow."

On a note sure to please tenants, Jones says smart investors need to look after their properties and keep them fresh. "If you take from property and don’t give to it, like a relationship, it’ll stop giving to you," he says.

Story by Carolyn Boyd. Carolyn is a property journalist and keen follower of Australia’s housing market.

There’s no denying that when it comes to property investing and making money from renovating, first impressions count. Changing the first impression of a property is the second highest returning “add value” technique. Here’s why…

BY ANA STANKOVIC

In this day and age most potential buyers start their search for properties online. They look up the locations they’re interested in, enter their budgetary constraints and select certain property profile details that they require.

Only once they’ve got the search results of this initial selection do they start prioritising which of these properties interest them. Out of the ones that look interesting to them, they’ll go and drive by a number of them and have a look at them from the outside before narrowing it down even further to a select few that they’ll actually inspect.

If a potential purchaser has two properties which are in the same area, have similar profiles (number of bedrooms, bathrooms and parking spaces) and are similar in price, which do you think they’ll be more interested in:

-       the one with peeling paint, falling down fence, big bushy plant hiding half of the façade, green eaves, rusted garage door, etc., or

-       the one that’s neatly presented and looks light and modern.

The answer is simple. It’s human nature to judge a book by its cover, but it’s only because they’re trying to imagine themselves living there. It doesn’t matter how good your renovation is inside if you can’t get potential purchasers through the door to actually see it.

It’s a numbers game. The more people come inside and inspect the property, the more are likely to be interested and pursue purchasing it, creating competition and pushing the price higher. So it’s in your best interest to get as many people through the door as you can.

Winning Formulas for Success on average gets around $4 for every dollar that we spend on renovating that first impression of a property.

So how do you work out what immediately needs to change with your first impression? There’s a simple way that a colleague of mine suggested a few years ago and it works a treat.

Stand on the opposite side of the street from your property and turn around so that you’re facing away from it, turn around and face it for five seconds and away again.

Anything unappealing that caught your eye in that time should be neutralised or removed. If there was a bright color, falling down verandah, rot, big plant, etc. – anything at all that stood out in a negative light – it needs to be addressed.

Once you’ve done this, have a look at other homes in your area that are in the next price bracket from your property – what are they doing? You want to increase the value of your home so it pays to try and get your property to look more similar to higher priced ones in the same area.

Ana Stankovic is well known as one of Australia’s leading renovating-for-profit specialists and is regularly featured in prominent industry publications, expos and continually educates investors. To find out more or sign up for Ana’s free newsletter, visit www.RenovateAndProfit.com.

Story from the API Blog

Reserve Bank gives borrowers a breather, leaving interest rates unchanged amid renewed signs of global economic weakness.

The Reserve Bank has given borrowers a breather, leaving interest rates unchanged amid renewed signs of global economic weakness.

The central bank’s decision today to keep its key cash rate at 4.5 per cent snaps a series of three rises in as many months, and follows a month of turmoil on global financial markets.

Worries about a worsening debt crisis in Europe sliced 8 per cent – or more than $100 billion – from the value of Australian stocks in May, and virtually eliminated any expectation of a rate rise by the RBA today. The monthly shares slide was the worst since the depths of the global financial crisis.

”Since the Board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets,” RBA governor Glenn Stevens said in a statement accompanying today’s decision. ”Investors have generally displayed a good deal more caution.”

Even so, Mr Stevens said ”global growth is still expected to be at about trend pace in 2010. ” While conditions in Europe have been relatively weak,  growth in Asia – home to many of Australia’s top trading partners – ”continued to be quite strong and may need to moderate in the year,” he said.

Since October, when rates were at half-century lows, the RBA has lifted the official interest rate six times in a bid to discourage excessive spending as the economy rebounded from last year’s slowdown. Those rate hikes have piled about $300 on to the average monthly payment for a typical 25-year, $300,000 mortgage.

”They’re obviously waiting and seeing what the effects of past interest rates have been,” said NAB head of Australian economics and commodities Robert Brooker.

”We don’t think they’ll be moving up again until towards later in the year.”
Despite rising company profits, low unemployment and an increase in weekly wages, the recovery remains patchy.

Data out today showed building approvals sank 15 per cent in April, the most since November 2002. Retail sales, though, rebounded, rising 0.6 per cent in April, twice the pace of growth that had been expected by economists.

The Australian dollar was little changed after the RBA’s verdict, trading recently at 83.75 US cents, from 83.64 US cents just prior to the announcement.

Story by Chris Zappone Fairfax Digital

Property industry groups have slammed the New South Wales Government’s decision to introduce a new tax on property transactions, but what impact will it really have on the market?

In the shadow of the Federal Budget last week, the NSW Government announced it was introducing a new transaction charge of 0.2 per cent for properties valued at $500,000 and above, or 0.25 per cent above $1 million.

The decision to introduce what’s become known as the ‘ad valorem’ levy (ad valorem is Latin for ‘according to value’) brought a furious response from the property industry.

The acting executive director of the Property Council in NSW, Glenn Byres, says the new tax will “hurt homebuyers and hurt the NSW economy” and deliver “a significant hit” to “homebuyers, the residential development market and (the) commercial property market”.

“NSW is barely creeping back from 50-year lows in residential construction levels,” Byres says. ”We can’t afford to strangle progress with a new stealth tax.” Sal Carrero, chief executive of property accountants Chan & Naylor, says the move will worsen affordability and hurt many prospective homebuyers in one of the most active market segments in the state.

“There are few family homes under the $500,000 threshold, particularly in Sydney, which will penalise families hoping to enter the market. This tax hits first homebuyers square in the eyes,” Carrero says.

“It’s also an added burden to property investors, who are likely to pass on the increased cost to renters. Increasing the cost of property to investors may seem like a populist approach but it will hurt the vulnerable as well.”

Urban Taskforce Australia chief executive Aaron Gadiel says the tax is merely a disguised increase in the rate of stamp duty.

“It again sends the message that anyone who invests in NSW will be subject to unpredictable and ever-changing imposts.”

NSW Opposition leader Barry O’Farrell has also chipped in, saying the “unfair” tax would make it even tougher for families looking to buy a home, and potentially impact on jobs if businesses took their investments interstate.

So just how big is this tax slug that’s going to hit homebuyers “square in the eyes” and “strangle progress”?

Well, as it turns out, it would total $170 on the sale of a $585,000 house, which RP Data puts as the current median price in Sydney.

That sounds more like a small pain in the behind rather than a true punch right between the eyes, but perhaps Aaron Gadiel gives a better picture of how the new tax will affect the marketplace.

He points out the levy would be a $23,500 impost on the purchase of a $10 million development site and a $123,500 impost on a $50 million development site.

That seems less like chump change.

Or perhaps the hyperbole over the new property tax is less a case of how much it will cost, and more about, as Wakelin Property Advisory director Monique Wakelin puts it, just how dysfunctional property taxes have become.

“Federal and state governments alike are growing increasingly dependent on taxes raised from property owners and this over-dependence comes at a high cost,” Wakelin writes for the Eureka Report this week.

“Rapidly decreasing housing affordability, a growing shortage of housing for buyers and renters and significant financial penalties for residential property investors are among the chief symptoms of a chronic problem requiring urgent reform.”

By Mathew Liddy Australian Property Investor

The man who predicted the global credit collapse of 2007 has warned that Australia’s housing bubble is ripe to burst at any time.

US investment banker Edward Chancellor has told the Australian newspaper our economy is yet to emerge from the global financial crisis.

Mr Chancellor, who works for GMO, estimates Australian house prices are more than 50 per cent above their fair value.

He says house prices would have to fall ‘quite considerably’ to revert to their average price in relation to average income.

He also warned first home buyers were among the most vulnerable, saying the ratio of their mortgage repayments to their income would rise to ‘very high levels’ as interest rates continues to rise.

A potential trigger for economic trouble and the collapse of the housing market would come if China’s demand for iron ore and liquefied natural gas slowed, he said.

Original Story taken from www.bigpond.com

Lois Buckett Negotiating with a Phone Bidder

A recent article in The Age stated

“Real Estate is no longer a man’s world as more women forge successful careers for themselves in this lucrative industry.

To say that women are a force in real estate is a glaring understatement; they have grown in numbers and are increasingly excelling in every area of the industry from property management to sales, auctioneering and investment advising.
Perhaps one reason for their success is the fact that women are also an increasing power in terms of home buying and property investment in their own right.  Studies show that 18 per cent of women buy property by themselves in Australia.”

This article was particularly interesting to me as an independent Real Estate Agent of the fairer sex and having jumped many a hurdle to attain the level of success and recognition that Lois Buckett Real Estate now represents.

Over the past 6-7 years the office in Lennox Head has been predominantly supported by female co-workers whilst expanding and growing rapidly.  Although the rental, sales and auction markets have fluctuated constantly over the years coastal and hinterland real estate has experienced huge growth over the past decade.

With a sister office opened in Bangalow and a majority of female staff at Lois Buckett Real Estate we have the area well and truly covered.

I personally feel that having women on the team is tremendous.

Generally speaking women have an ability to work methodically, are able to multi-task and easily build relationships with people in all facets of the industry.

From the female perspective, a profession in real estate can offer flexibility and opportunity and a chance to meet people and develop good communication skills in a positive environment.

Having said all this, a few of the male species have now infiltrated the office and this adds a new dimension to the equation!  What I look for in an employee is someone who is passionate about real estate, is truthful and forthright and enjoys working in a team environment.

I’m happy to say that gender is not a governing factor.

Peter Kakos in Action

Auction 1st May

Our previous mega auction held in February proved a huge success and resulted in property sales in excess of $13,000,000.

The next MEGA AUCTION date is set for Saturday 1 May 2010 at 9am with registration for bidders starting at 8.30am.

With so much activity in the property and real estate market place and predictions of huge growth factors in our beautiful area we are, once again, anticipating a successful auction across the board.

We are thrilled to have Peter Kakos as our on-site auctioneer as we all are aware of his amazing talent and dedication to the real estate industry.  The event will be held at the Ballina Beach Resort, Compton Drive, Ballina.

This auction is proudly marketed by Lois Buckett Real Estate.

We are offering a huge range of property, land, homes, units and rural acreage in sought after areas of Lennox Head, Ballina, Bangalow, Cumbalum, Clunes and Knockrow.

Our Autumn Edition of the Coastal & Hinterland Property Guide has just hit the streets. 

This is jam-packed with details on all our auction properties and a whole lot more.

Look out for this up to the minute publication in your letterbox or in this week’s issue of the Byron Bay Echo.   For More Information Visit Any One of These Properties on our Website Lois Buckett real Estate.

Hope to see you there!!

RESULTS:

It was a very successful day with 2 properties selling under the hammer and 1 sold prior to auction day.

Our sales staff are busy negotiating with several other interested parties and are close to finalising the sale of 5 excellent properties off our Auction List.

Watch out for the next Mega Auction in June 2010!!!!!!