Housing reforms to help you enter the Sydney market

The State government has announced several measures to improve housing affordability, assisting first home owners to enter the market.  Measures include scrapping stamp duty for certain properties purchased by first home buyers, and increasing the taxes foreign investors in order to reduce competition (and thence prices).

A comprehensive package for first home buyers will abolish stamp duty on new and existing homes valued up to $650,000, and provide stamp duty relief for homes up to $800,000.  In the Sydney market, this is of limited help for purchases in the Eastern Suburbs, but is helpful for certain property purchases in the Inner West, North Shore, and of course for properties further out such as West, North-West and South-West.  It seems that this is the strategy: to encourage housing in the outer-Sydney areas and reduce demand on the Inner-City areas that have no more land available.

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Stamp duty on lenders' mortgage insurance will also be abolished.

The surcharge on stamp duty for foreign buyers will double to 8%, and the surcharge on land tax will increase from 0.75% to 2%, making Australia a less attractive place for foreign purchasers to purchase in, reducing competition and potentially lowering prices for local purchasers.

The Government has also changed the foreign resident capital gains withholding (FRCGW) rate and threshold.  Formerly applicable as a 10% tax on properties selling for greater than $2M, now when the

contract price is $750,000 and above, the FRCGW withholding tax rate will be 12.5%.

The government also announced measures to help first home buyers gain an advantage over investors, who the Govt (perhaps erroneously) perceives to be a source of strong competition for home owners.  I do not share this view, because home owners are typically emotional buyers who are willing to pay more for the property they love, whereas investors are rational buyers who place a ceiling on the purchase price, ensuring that the property meets its purpose of providing a certain calculated return.  

The Government has also outlined plans to boost housing supply and infrastructure across the greater Sydney area.  Unfortunately for the people who will live thee, this also means fewer trees which provide natural beauty to the environment in which we live, as as supporting our wildlife and ecology.

Purchasing this side of the budget?

For many people, purchase decisions prior to the budget are fraught with uncertainty.  Yes, there might be changes coming with the budget, however those changes would only impact purchases that occur after the budget comes out.  Most certainly, there are also changes to lending, and in terms of lending, people are much better purchasing now than down the track when those changes come into effect: http://www.reinsw.com.au/Web/Posts/Latest_News/201704/APRA_tightens_lending_rules.aspx.  The push is for a 20% deposit for investors, and for the loans to be principal and interest, rather than interest only.  This will certainly impact the investor market, however the investor market does not drive property prices: it is home owners that drive the prices because they are more emotional buyers who are willing to pay more for the property they love, whereas an investor puts a rational $ cap on the purchase price and walks away after that point.

With the budgetary changes, they will apply all over Australia, not just Sydney.  If the market takes a hit, Sydney is better protected than any other City, and has always re-bounded and risen within a full property cycle (7-10 years).  In the current market, an Eastern Suburbs purchase is recommended as there is always strong demand for rental properties in the east, regardless of what the market conditions are like for buyers; in fact, the harder it is to purchase, the stronger the demand for rental properties, and if interest rates increase gradually, so too will the rents.  In terms of the purchase price, where people are concerned about potentially over-paying today as compared with after the budget comes out – these sorts of fluctuations do even out over the longer-term (7-10 years). 

In summary, on the one hand, yes the budget will likely bring changes, however the lending policies concern me more as it’s harder for people to get a 20% deposit, whereas they’d more easily forego say negative gearing in a rising market (I don’t believe prices will fall).  The option that some consider is investing in shares which are more liquid than property, but over-all, property out-performs shares in the long-run.

Melissa Maimann is a licenced Buyer's Agent in Sydney. She assists home owners and investors alike.  If you would like a confidential discussion about purchasing your next home or investment, don't hesitate to make contact.

Are Buyers' Agents Driving Prices Up?

A recent news article suggests that it is actually buyers' agents who are responsible for pushing up our housing prices!

A buyer's agent is a licenced real estate agent who works for the buyer, rather than representing the seller.  A buyer's agent gives advice on properties and property types, helps you work out a budget, searches for suitable properties that meet your brief, inspects those properties for you to save you time, helps to evaluate the property - including suggesting a fair price for it - and negotiates the purchase so that the buyer doesn't have to.  The buyer can be as involved as they would like to be - inspecting as many properties as they like - or they can just inspect and consider the handful of properties that the buyer's agent has identified as being totally suitable.

Buyer's agents are becoming increasingly popular, and this is related to our busy lifestyles, the time and cost required to fully investigate and consider properties of interest, perhaps a lack of market knowledge and the demands of work / family. 

Not to mention, the average person takes at least 12 months to find a property, whereas a buyer's agent generally reduces the search time to only 2 months.  Ie, with a buyer's agent, a buyer can buy 10 months sooner, on average.  Considering the way prices move in the Sydney property market, a property will go up far more in 10 months than what it will cost to engage a buyer's agent, making a buyer's agent a very cost-effective option for savvy buyers.

However, in recent times, there has been much discussion about the manner in which buyers' agents structure their fees, and in particular, question over whether the fee structure actually plays a role in pushing prices up.  This is of course a major concern, because first and foremost, a buyer's agent has a fiduciary duty to the buyer to do the very best by the buyer.

Generally speaking, buyer's agents charge a % commission of the purchase price.  This commission is usually 2%, but for lower priced properties, this commission can be as high as 3%.

This means that as a buyer's agent, I get paid more as the purchase price increases.  Ie, I am best served by having you - the buyer - pay more. 

But wait - that's not why you would engage my service!  You would engage my service because you want to buy a property at the best price, not the highest price.

In my business, I have only ever charged a set fee for services.  This fee is generally in line with 1% - 2% commission equivalent, except that it is not a commission-based fee: rather, it is a fee that is established up-front and a fee that does not change with the purchase price.

The other challenge with a commission-based fee structure is that the buyer's agent is only paid if and when a property is purchased.  Herein lies the second issue: if I can get a buyer to buy quickly, I am paid sooner.  This is also not consistent with a buyer's agent's fiduciary duty to the buyer.  The buyer's agent is meant to be advising on the best property for the client's needs and ensuring that the property is a good purchase - and purchased at the right price.

A commission-based structure - where the buyer's agent is not paid unless there is a purchase - and where the higher the purchase price, the more they are paid - does not reflect the duty owed to a buyer by their representative.

The only fair and honest solution is a fixed fee that is paid regardless of the outcome.  Ie, a fee for service.  We pay a fee for service for all other service businesses: we do not pay our solicitor only if we win our case; we do not pay the accountant only if we get a tax return of $x amount; and we do not pay the vet only if our pet is cured.  We pay a fee for a service provided, we do not pay for a result.  Similarly, a buyer's agent service can be viewed as a fee for a service, where the result or outcome is a by product of the service.

A fee-for-service buyer's agent model ensures that meeting the buyer's needs is in line with the buyer's agent's remuneration.  This is the fee model I use here at Melissa Maimann Buyer's Agent.  The fee may be scaled according to the property type, the ease or difficulty of the search, or any other parameters.  This fee is established and known ahead of time, and the retainer ensures that the agent is remunerated even if the buyer chooses not to proceed with a purchase. 

I offer a no-obligation property consult.  Arrange yours today.

The 6 Things you Need to Know Before you Buy a Property

Don’t buy the first property you fall in love with

Especially if you are new to your property search.  Take some time to find out what is on the market, get a sense of prices and then start to make some harder decisions.

Keep your emotions in check and look beyond the beautiful home styling and presentation.  Ensure a comprehensive and thorough inspection - you can engage a buyer's agent yo come with you if you like, for an objective view.

Can't see the forest for the trees?

Sometimes people have a hard time looking beyond the colour of the paint or carpet, or perhaps the layout of the home, or even the odour of the property.  These are all things that can be changed.

Sell before you buy

Avoid the headache and bridging loan!  You will never know what you can get for your current home, until you sell it.  Agents may give inflated appraisals simply to get the listing, and you may be worse for wear if you do not achieve the price you need to achieve for the sale of your property when you have already purchased a new home.

You need a 20% deposit

If you borrow more than 80% of the property’s value, you may need to take out lenders’ mortgage insurance, however you can absolutely get a loan when less than a 20% deposit.  Speak with your trusted mortgage broker.  It may be possible to get a loan with only a 5% or 10% deposit.

Buyer beware

Buyers need to do their due diligence - and do it well!  But let's face it: how often does the average person buy a property?  A better option might be to engage a buyer's agent to conduct due diligence on the property you are seriously considering buying.  I say " buyer beware" because you buy a property in the condition in which it is sold.  If you find faults at a later date, that were there at the time that contracts were exchanged, you can’t get a refund or compensation or back-out of the contract.

Other fees?

Don't forget the other costs associated with purchasing: stamp duty, solicitor / conveyancer, insurances and removalists.  Then, once you've purchased, expect to pay for water, strata (if it's a strata unit), council and possibly land tax.

Buying Off the Plan?

As a buyers agent, people often ask me if I recommend new / off the plan, or established properties.  I will generally recommend established properties most of the time.

Although off-the-plan purchases can offer some significant cost savings and inducements, often times, this approach does not pay off in the long-term.

First and foremost, you should ask yourself why the developer needs to make such cost savings and offer such inducements if the property is so good.  Next, you need to ask yourself: if these cost savings and inducements are necessary for you to purchase the home, what will you need to discount to a future buyer, in order to sell the home?

Contrast this with an established property - and you rarely find the vendor offering cost savings and inducements to the buyer.

The best property to buy is the one that is hotly contested.  The one where you can hardly squeeze in the front door of the open home, because there are so many people in there.  The one that sells prior to auction for a great price: that is the sort of property that will appreciate well, and the one that you will eventually be able to sell - for an excellent price.

Many investors and home buyers make costly and regrettable mistakes when they buy a property off the plan, particularly when their decision making process was influenced by inducements and cost savings.

The best option, in my professional opinion, is to buy a home that you can see, feel and learn about: a property that has a history.  With an off-the-plan property, you never really know what it will end up like.  Will there be building defects?  How significant will they be?  Will the fittings and fixtures be in accordance with what was agreed? In one case, the property ended up being short of a bedroom, and there was nothing the purchaser could do about it!  The developer had the right to modify the plan, and they exercised that right.  In many other cases, significant and costly building defects negate any cost savings and inducements offered.

The best advice I can give any property buyer is to source independent and objective advice from a licenced, independent buyer's agent.  NB: there is a difference between a buyer's agent, and in independent buyer's agent.  An independent buyer's agent works solely for you, the client.  They are not employed or engaged by a developer to "sell" their stock, and they do not work with a selling agent.  They are paid directly and solely by the client - to maintain their Independence and impartiality in the property purchasing process.

5 Tips for Finding your Perfect Home

Here, I share my very best tips for finding your perfect home.

1. Write down your wish list

Be as detailed and thorough as you can be.  List every little thing that's important to you.  Next, write a number from 1 - 10 next to each item, with 10 being absolutely critical (the home just couldn't be your home without it), to 1 (being non-essential, or something that can easily be changed). 

2. Divide your list up

Convert your list from #1 above into two lists: one list will have your number 7 - 10 items; and the other list will have your number 1 - 6 items.  Review the list to ensure that the 7 - 10 items really ought to be in that category.  These items will become your non-negotiable deal-breakers, whereas your 1 - 6 items will be your "nice-to-haves".

3. Bring your list with you when you inspect properties

If you walk in the home and you like it, pull out your list.  Rank the homes according to the non-negotiables and the nice-to-haves.  As soon as you identify that a home does not have a non-negotiable items, move on.  Don't give it a second thought.  Your new home simply must have your non-negotiables .... otherwise they're not non-negotiable.

4. Get a second opinion

You've found a home you love, it has all your non-negotiables and many of your nice-to-haves as well.  You're feeling really positive about this home becoming yours.  Get a second opinion.  The best second opinion you can get would be from a buyer's agent - or else it might be a friend or relative.  They trick is to have a completely impartial and independent opinion on the home.  Maybe it looks and sounds amazing, but the levies are incredibly high, or there's structural damage, or there's a new development going up that will obstruct the view .... all these things must be considered.

5. Does it measure up?

Bring your tape measure.  Yes, really.  Measure up the main large items you're going to be bringing with you to your new home, and ensure that they'll fit in the space provided.

How do you know you need a buyer's agent?

Some people believe a buyer's agent is really only used by people who are buying prestige properties. Nothing could be further from the truth!  Buyer's agents help people locate off-market properties, negotiate purchases, bid at auctions, evaluate properties, inspect properties, manage all the communication with the agents and generally make the purchasing process easier and simpler.

Some keys to knowing you might need a buyer's agent:

  • You're in a rush to move - you have a deadline such as you've just sold your home and need to purchase to avoid renting
  • You're pregnant or have a young family and it's just too hard / uncomfortable to get out and about to all the inspections
  • You work very long hours and cannot take time off during work hours to inspect properties during the week
  • You feel unsure about your negotiation skills
  • You've been looking for more than 6 months and just haven't found anything you like
  • The properties you're interested in all go for more than what your budget will allow
  • You need help and guidance to know what parts of Sydney would be good to purchase in
  • You have a deposit and pre-approval

A buyer's agent will generally see you purchased well before you would otherwise purchase, and also ensure that you're armed with all of the relevant facts about the property that you're interested in.  The fee paid is a small investment in your future, particularly in a market that is going up at such a fast rate - can you really afford to take 12+ months to find a property when a buyer's agent will shorted your property purchase to 2-3 months?

Underquoting: is it still happening?

A recent news report speaks to ongoing underquoting by agents who are finding clever - and at times underhand - ways to underquote.

I think it is fair to say that underquoting is still occurring.

But what is happening elsewhere?

There are increasing reports of agents simply not providing a price guide at all.  "The vendor is waiting for feedback from the market before setting a price guide." "We'll provide a price guide a few days prior to the auction once we have a more accurate understanding of market feedback." And so on.  This is also a bit underhand, in my opinion, since most (?? all) agents provide a price guide to the vendor when the vendor signs an agency agreement with the agent ... What vendor signs up with an agent who says, "I really have no idea what your home is worth, Ms Smith.  How about you spend $8,000 marketing the property and a few days before the auction, I'll let you know what it's worth."  It simply doesn't happen.  All that buyers want is to know what price the agent and the vendor believe the property will sell for - so that they can adjust their expectations of value and continue to investigate the property - or move on.

Buying in Sydney: is now a good time to buy?

In a word, yes.

Stock levels are down by 30% - 40% at the present time, compared with the stock levels that we've had for the past two years.  While some would say that it is definitely a sellers market and that buyers should beware, there is another view.

The property market in Sydney continues to climb.  Capital growth has been around 7% for the past year.  While it might be costly to enter or trade in the current market, the reality is that time is ticking by.  The property that you're holding off on buying is only going to go up - and you're missing that capital growth!  There are few asset classes that increase by 7% per annum - that's not taking into account the rental yield - with very low risks (if purchased well).

In 6 months, 12 months, 2 years, we're still going to be lamenting that Sydney prices are so high - but they're only going to keep going up.  Do you really want to stay out of the market waiting for the impossible to happen?  Buy when you are able to - if you can't afford to buy where you want to live, then consider rentvesting.

Our stock levels are down, and vendors are doing well.  You could also be doing well - by holding a property that is increasing in value at this crazy property time.

Investing in Commercial Real Estate

When we consider buying property, the two main options are residential properties and commercial properties.  Residential properties that those that people live in, whereas commercial properties are those where people carry on a business, eg a shop, restaurant, office etc. 

Sydney residential property prices are high (though in my humble opinion, reasonable considering these are the prices that people are willing to pay .... we thought they were high in 2015, 2014, 2013, 2010 as well).  Anyhow, these "high" Sydney prices are causing some people to consider other forms of property investment.  And this is where commercial property offers some significant advantages - and also some things to be mindful of.

Capital growth

Capital growth is virtually guaranteed in an A-Grade residential investment property.  It is not always guaranteed when purchasing a commercial property.  The capital growth of a commercial property is tied to its lease.  A vacant commercial property has little worth; a leased commercial property - particularly one with a good tenant and a long lease - is far more valuable.  When a commercial property is not tenanted, it may be months - and in some cases years - before a new tenant is found - so selling during this time may well mean selling for a loss.

For this reason, the capital growth potential of a commercial property is not as reliable as a residential property, where tenants are generally much easier to find and value is easier to establish.  Demand for residential property is always there - perhaps the property will be vacant for 2 weeks or so - but this is not the same as a commercial property that might be vacant for many months. 

The other factor affecting capital growth is that in many parts of Sydney, supply of housing is limited and demand is assured, and this maintains the property's value.  This is not always the case with commercial property because business is risky and businesses go broke all the time.

Demand for residential property is constant - everyone needs a place to live and emotionally, we have a need to love where we live.  Commercial property is different: we don't need to love our work place, demand is only there as long as the business is there, and capital growth for a commercial property is usually reliant on economic growth, rather than population growth. When the economy is in a growth phase, more new businesses start up and this increases demand for commercial premises and supports capital growth.  On the other hand, commercial property is more vulnerable during an economic downturn than residential property (because people need a home regardless of how the economy is doing).

Rental yields

Rental yields for residential property can range between 2.5% and 5%, whereas commercial property is generally 5% - 10%: significantly higher.  In essence, the risk of uncertain capital growth is offset by the increased rental yield.  The cash flow derived from the rental yield can be used to wards a deposit for a future property purchase, whereas had the investor purchased a residential property, that property would almost certainly be negatively geared, at least for the first few years, meaning no positive cash flow to contribute to a future purchase (although there would be equity).

Deposit

Banks are often much more reluctant to approve loans for commercial property investments, and often a 30% deposit is required.  The is in contrast to residential property where often only a 5% or 10% deposit is required. 

7 things people forget when buying a home

There is so much to think of when buying a home.  Loads of searches, meeting agents, inspecting properties, back to searching and more searching, then more inspections and so on.  It seems never-ending!  But in amongst all of this busyness, is also a stack of things that many buyers forget.

1. Loan pre-approval

It is often neglected right up until the day before the Auction.  A typical loan pre-approval can take a few days to complete.  I liken it to going shopping knowing how much money you have to spend: if you don't have loan pre-approval, you can't possibly know how much you can afford to spend, and you are not in a position to purchase.  It's free to engage a mortgage broker and get pre-approval.  It's a bit of paperwork for the reassurance of knowing your budget.

2. Selling costs

People who need to sell before they can buy, often don't factor in the costs of selling and subtracting those expenses from the sale price.  Costs include agent's commission, marketing and home styling, to name a few

3. Stamp duty

Stamp duty is a tax levied on most property purchases in Australia.  The amount will vary, but is generally around 4% in NSW.  It is paid on - or just before - settlement.   Your mortgage broker will factor stamp duty into your budget. 

4. Costs of moving in

Some homes require some minor renovations or modifications before you can move in - these costs need to be factored in.  There are removalist costs, perhaps cleaning costs, perhaps storage costs and of course the cost of your time.

5. Lender’s Mortgage Insurance

If you’re borrowing more than 80% of the house’s value, you’ll usually need to pay Lender’s Mortgage Insurance (LMI).  Your mortgage broker will advise you.  It is generally added into the mortgage, so it is not a separate cost, but you will pay interest on LMI if it is included in your loan, so you will end up paying even more in the long run.  it is still; a great idea to have LMI if it means you can get into the property market, or if it means that you may have a second deposit available for another property purchase in the near future.

6. Conveyancer / property lawyer's fees

These can be around $2,000 for reviewing the contract for sale/purchase and for advocating for you through your property purchase.

7. Professional representation from your own buyer's agent

A stitch in time saves nine.  While there is a cost associated with a buyer's agent service, it will generally save you much more in terms of negotiation of the purchase price, avoiding costly mistakes in your property purchase, preserving your mental and emotional state and of course freeing up your time for other income-generating pursuits (or simply having fun).

If you need professional representation through your property purchase experience, contact me today.

 

Exhausted buyers make poor buying decisions. Learn how to avoid the trap.

For many property buyers, exhaustion, dismay, disillusionment and despair are all too common. 

Months of searching reveals:

  • Properties that sell on the first open home
  • Properties whose open homes are cancelled without any notice because the property has been sold already
  • Doom and gloom stories shared by other house-hunters who you meet on your property search travels
  • Lies, scare tactics and under-quoting from agents leaves you wondering who you can trust
  • Missing out at auctions time and again
  • Endless hours spent online, enquiring with agents, inspecting properties - but no result

For buyers who can really empathise with the above comments, the risk of making a poor purchasing decision is high.

Our auction clearance rates are climbing steadily as we approach Spring.  In fact, by some reports the auction clearance rates are the highest they've been in years, for this time of the year.  Bad news for buyers.  It means that even more will miss out - and risk buyer fatigue and make poor purchasing decisions.

The risks of buying the wrong home are many:

  1. Cost: buying the wrong home and realising it later may mean another sale and purchase in the not-too-distant future.  Buying and selling are both costly.
  2. Cost: buying the wrong home and realising it later may require you to renovate your new home to make it more suitable: again, if this cost was not factored into the purchase, it can add way more cost than you had budgeted for.

The very best way - and by far the cheapest way - to avoid buyer fatigue - or prevent poor purchase choices is to engage a buyer's agent.  Why?

  1. A buyer's agent will keep you in check: they will provide feedback on properties that is impartial, not emotional.  If the property is not right, it will be ruled out, quick-as-a-flash, without your emotions becoming involved.
  2. A buyer's agent helps you to accurately assess a property, warts and all, including an estimate of the fair price for the property. This can mean you don't go for a property that is likely to sell for more than you can afford; and that you don't pursue a property that is a "dud".
  3. A buyer's agent will help you establish a robust list of true needs vs "nice-to-haves".  This means that the searches will be far more focused and the whole property purchase time will be shortened.
  4. A buyer's agent will give great recommendations for all of the property professionals you may need
  5. A buyer's agent will ensure that you have your finance and deposit ready before the search begins
  6. Engaging a buyer’s agent will cost a small fee or a percentage of your home’s purchase price, but it may save you thousands in the long run.

If you are tired of looking, frustrated by the market and generally "over it", I'm here to help you.  Contact me today.

The Bubble? What Bubble?

Property is a very popular topic of conversation.  Certainly, everyone has a view on it, loves to talk about it and has an interest in it.  There's a common thread in conversations about the "Sydney Property Bubble".  I often wonder, "What bubble?"

You see, I don't believe there is a bubble in the Sydney property market.  There are some areas that are over-supplied, but in areas such as the Inner West, Eastern Suburbs, Lower North Shore etc, demand will always be strong, lifting property prices.

Fueling this view of a bubble, people also complain about housing affordability.  However, the alternate view is that with interest rates at record lows, housing is actually the most affordable it's been for a long time. While housing may be more expensive today (and isn't everything?), property is actually more affordable - hence the demand for it and the subsequent higher prices.

Waiting for the bubble to burst has delayed many people's purchases.  They believe they're better off siting back and waiting for the market to ?? lose steam, ?? prices to drop .... I am not sure!  People I spoke with in early 2015 were not going to buy just then, because 2016 was going to see prices drop, for sure.  Well, they certainly haven't, and now those same people have been priced out of the market they had initially expressed interest in and will need to search further out.

What advice would I give to someone who wanted to buy?

  1. Ignore the hype about the bubble.  There is no bubble.  This is the Sydney market.  We have always led Australia - because we live in an amazing City and most people agree that it is amazing - so many people want to live here and this demand drives up prices.  It has in the past, it is at the moment, and it shall in the future as well.
  2. Buy in Sydney.  Look at past record growth and compare it with other areas you may be considering.  Know that past performance is a great predictor of future performance.  Sydney has always out-performed other Capital cities.  If you're investing - invest where it is safe (ie, where you're getting a good return on your investment - now and into the future).
  3. Buy now while finance is cheaper.  It will save you a lot on your loan interest.
  4. Do not over-extend yourself.  Understand that the low interest rates we currently have will not last - so be sure that you can afford your repayments.
  5. Buy a great property.  What is great today - one with strong demand - will likely be great tomorrow - meaning if you want to sell in the future, there'll be a strong market of keen buyers for your property.  Don't buy a cheap home just because it's available.  If it's cheap, there's probably a reason.

If you would like a confidential discussion about purchasing your next home or investment, please do not hesitate to make contact.

6 Steps to Becoming a Savvy Private Landlord

It's an attractive option to many landlords: being a private landlord, or DIY Property Manager.  It enables you to deal directly with the tenant, choose the tenant, keep all of the rent and be the first to know of - and fix - any problems.

It can certainly be a rewarding experience - but you need to know a lot about the law and stay abreast of changes and developments.

Step 1: Understanding the relevant laws

Each State has different laws for tenants and landlords.  You need to have a very thorough understanding of those laws as they relate to you, your property an the tenant.  This book will summarise all of those laws for you.

You need to be aware of what tenants are entitled to have and what you're obligated to provide, while also understanding where you can draw the line.  For example, does the tenant have the right to demand a washing machine?

There are laws for all aspects of property management from advertising the property, conducting open homes, screening tenants, collecting a holding deposit (if this is allowed), receiving rent, terminating a lease, conducting inspections (including the frequency of them), bond, rent increases, access to the property and so much more.  For many new owners, getting their heads around all of the laws can be quite overwhelming - if so, it's best to get a professional Property Manager. 

Step 2: Advertising the property and showing it

Choosing the wrong tenant can be your worst (and a very costly) nightmare. 

I can't over-state it: you must prioritise choosing a great tenant.  Conduct the open homes yourself.  Meet all of the potential tenants.  Ensure that the property is advertised with professional photos and a well-written ad to attract good quality tenants.  Find out what the tenant is looking for in their home - and ensure that yours will be suitable for them - you want a long-term tenant after all. 

If you don't find a great tenant, keep searching.  Don't settle. 

Screening tenants begins with the way that you advertise your property.  Write your ad and present your home for the tenant you want.  Treat your potential tenants well and talk with them.  You'll get a great sense of those who are suitable for your home and who you would like to look after your investment for you.

Step 3: Choosing a tenant

Hopefully, you've marketed your property so well that you've had busy open homes and a few applications to choose from.  Begin screening the applications and the supporting documents.  Ensure that everything "checks out".  Tat is things like name, place of employment, current address etc.  You might like to cross-reference information to ensure it is accurate and current.  What you're trying to ascertain is that they'll pay the rent on time and look after your home.  If they've always paid their rent on time, chances are they will with you, too.  If they've looked after their previous homes, chances are that yours will be looked after too.

A thorough application form is your best ally here. 

Step 4: Preparing the correct documents for the lease

It's vital to have a residential tenancy agreement.  It protects you and it protects the tenant.  As well as this, you'll need to register the bond.  Always have a residential tenancy agreement and always collect the full bond.  Again, each State does it slightly differently, so you'll need to become familiar with the appropriate documents for your State.  Consider any additional terms you may wish to add to the lease - but also ensure that it's legal for you to add those additional terms.  If it's a unit in a Strata block, you might also need to add a copy of the Strata By-Laws and any Special By-Laws.

You'll also need to complete a condition report and have your new tenants complete their copies and return one to you.

Step 5: Conducting your first inspection

I suggest doing your first inspection around 6 weeks after the tenants have moved in.  It's enough time for them to have settled in a bit, and long enough for them to have lived in your home for you to tell that it is being looked after.  Ensure that correct notice is given and try to have the tenants home when you inspect the property.

Ensure you follow the correct procedures for property inspections - failure to implement these (eg providing correct notice) can lead to legal action. 

Step 6: Keeping records

There are various records you'll need to maintain throughout the tenancy, such as a rental ledger, reports of inspections carried out, the residential tenancy agreement, bond documents, the tenancy application form, copies of any correspondence or notes of communication with the tenants and so on.  It's best to keep all of this together in a file, so that if for any reason you need to go to Tribunal, all that you need is right in front of you.

If all of this sounds too tricky, a Property Manager is the answer.

FREE GUIDE TO BUYING WELL IN SYDNEY'S EASTERN SUBURBS

Is it taking a while to find the right home?

Have you missed out again at auction?

Unsure of the best approach to buying in the Eastern Suburbs?

Download our FREE guide packed with the best tips to out-smart your competition in this HOT property market

 

Purchasing an Investment Property as your First Purchase

Many first home buyers seek to live in their new purchase.  But there is another option: buying an investment property.  For many reasons, it makes perfect sense to buy an investment property as your first home.  Read on to find out why.

Buying an investment property first may help you achieve your ultimate goal of owning your dream home in a number of ways:

1. Buy where you can afford

Investing in real estate allows you to buy a good home in a good area that you can afford, even though it may not be the area or property type you wish to live in.  It gets you a foot in the market.

2. Someone else pays the mortgage

New neighbourhood

With an interest-only home loan, your rent ought to cover - or almost cover - your loan repayments.  This means you get the benefits of owning property - capital growth - while someone else (your tenant) pays for it.

3. Tax benefits

Your accountant can speak to the many tax benefits of having an investment property.  Just about every expense related to the property becomes a tax deduction.  Remember to get a tax depreciation schedule - no matter how old your property is.

4. Capital growth

Capital growth is the increase in the value of the home over time.  Generally speaking, we can pursue either rental yield or capital growth in properties.  It is not easy to find both high capital growth and high rental return in the same property.  Capital growth is arguably the more important feature because wealth from real estate provides the opportunity to re-finance and buy more properties.

Cautions

1. If you're planning on renting - it's not always smooth sailing.  Landlords sell.  Landlords renovate.  Landlords move in.  For many reasons, you may not be able to renew your lease.  But - if you find a great home and are in a position to rent it long term - that is brilliant.

2. Speak with your accountant who can advise on the wisdom of a "rentvesting" strategy.

3. Understand that property is not very liquid.  This means it cannot easily be turned into cash, should you ever need cash fast.  Property takes time to sell, and costs of selling (and purchasing) are high.

4. Appreciate that while well-chosen investment grade properties almost without exception appreciate in value, there may be periods of time along the way when the property price is actually down.

What do People Look for in their Next Home?

Ever wondered what sorts of things make a property attractive to buyers?  The following list can help you to determine if the property you're considering buying is likely to be bought for a premium - because it is so attractive to so many buyers.

  1. Mobile and internet reception: in today's life, these are seen as essential.
  2. Crime rates.  People want to live in safe suburbs, particularly tenants who may feel limited in their ability to make their home safer.
  3. Trees.  We chop them down at a rate of knots, but we actually value them for their inherent beauty, shade and the wildlife they attract.
  4. Public transport: people value being close to public transport.  Note, this is close to, not next to. People generally like to be within a 10-minute walk of a train station, and a 2-3 minute walk of a bus stop.
  5. Cafes and restaurants.  People love to be close to these.  It's the ability to walk around the corner and grab a coffee, meet friends and be close to activity.
  6. Access to parks is an important one.  With so many people having a furred friend, access to parks is important.  See #3 above.
  7. Shops are important: proximity to, though, not right next to.  People generally like their homes to be quiet, but close to hubs and activity.
  8. Close to work: people dislike being so far from work that they spend hours traveling each week.  Being close to work is a huge bonus.  See #4.

So, if the home you're viewing ticks a lot of these boxes, chances are it's going to sell quickly.  If you want it - you need to act quickly and decisively.  If you need a hand assessing due diligence on a property and negotiating the purchase, sing out.  I'm here to help!

Surviving in Sydney's HOT Property Market

A recent Financial Review article details a recent auction night where the auction room was packed so full that people were occupying the street outside the auction room!  Auction clearance rates in Sydney's Eastern Suburbs near 100%, and as many as 50% properties sell prior to auction or off-market.

So how is a property buyer to survive in this market?

The sorts of complaints I hear every day are:

  1. Turning up to open homes, only to find that the vendor already has a buyer in mind - but is offering one final open home just in case they can better the offer
  2. Homes going for much more than the sales agent indicated
  3. Needing to be quick - almost a sense of not having time to adequately and accurately evaluate the home before it is bought - by someone else
  4. Not knowing of all the properties that eventually become sold
  5. High prices
  6. lack of affordability
  7. All that's "left" on the market is the "not-so-nice" homes; all the good ones are snapped up

What tips can I share with readers to assist?

  1. Be prepared: have your finance ready and also a deposit.  If you don't have pre-approval and a deposit, you're not in a position to buy.  It's like walking into a shop to buy something with no money in your wallet (and no plastic).  Get your finances sorted and a deposit - and agents will take you seriously.
  2. Know what you want: this saves you time inspecting and researching properties that are not going to be suitable for you.
  3. Match what you are seeking with what is available in the market: both in the suburbs you're looking at and your price range. 
  4. Be flexible and adjust to what is available in your chosen suburbs - or choose other areas that offer what you're after in your price range - or, do what many are now doing: buy an investment property that you can afford, while you rent where you want to live
  5. Be decisive.  once you've found the home you want to buy understand that other people will probably also want to buy it. 

If you need a hand, contact me.  I offer flexible and affordable property buying options designed with every-day home buyers and investors in mind.

The Best Tips for Buying your First Home (or your next one)

For many people, buying your first home - or your next home - can be tough.  Really tough.  Sydney prices continue to rise and just when you thought you had enough saved up ... it is no longer enough.

It's exciting to look through internet photos of gorgeous homes, dreaming of where you;d put your things, how you'd feel to live there and so on ... and then reality hits.

Saving up for a deposit can be difficult - saving for anything can be a challenge.  The trick is:

  1. Work out what you can comfortably go without
  2. Use less of the things you can use less
  3. Repeat
  4. Increase income where possible: take a casual job, even just a few hours on the weekend. 
  5. Set a budget - and stick to it.
  6. work with a buffer for unanticipated expenses - but hold yourself accountable with this buffer.  Movies and dinner every week are not buffer expense items.  Buffer expense items are things like: the computer died and needs to be replaced; a period of illness that increases your medical expenses.

Getting a loan

Usually, lenders will require evidence of regular income and savings from the past 3-6 months (if employed) or up to two years (if self-employed).  Keeping that information handy is really helpful.

If you're self-employed, perhaps in a new business, and you know it'll be a couple of years before you're able to get a loan, use that time to reduce your expenses to the bare minimum and boost your income wherever possible. Reduce your credit card limits.

The government offers the First Home Owner Grant for people who are purchasing their very first home. Eligibility criteria apply though.

Use an experienced mortgage broker

An experienced mortgage broker knows how to get you the very best loan and loan structure for your needs.  It's not all about the interest rate; the structure of the loan is just as important, and also be sure to check the comparison rate.  It often tells a very different story!

Once you have a deposit saved - or are close, seek pre-approval for a loan

Meet with a mortgage broker and be honest about your situation.  Submit all of the required documents as soon as you are able, and with any luck, you'll have pre-approval within 1-5 days.

Pre-approval and a deposit in place

The next step is to engage a buyer's agent to locate the best property for your needs, and negotiate the purchase price down where possible.  Your first home sets you up financially for life.  It's important that the home be one that is likely to appreciate in value and continue to meet your needs.  A buyer's agent can sort the best properties from the not-so-good properties, ensuring that your hard-earned deposit and mortgage repayments are working to assist your longer-term finances.

The Landlord Mindset - George Astudillo

I had a wonderful surprise: my colleague, George Astudillo, popped a copy of his brand new book in my letterbox over the weekend.  It is a brilliant read, and really spoke to me as a landlord, property buyer, tenant and property enthusiast.  Where ever you are in Australia, his book is invaluable.  It clearly identifies all of the State-based relevant legislation as it affects property management and purchase.  Whether you have your property managed by an agent or are self-managing your property, this book is gold! 

This book helps you to:

  1. Think like a landlord
  2. Identify the properties that are likely to be great for tenants
  3. Market your property
  4. Choose your tenants
  5. Manage your property
  6. Choose a property manager

This book is truly invaluable for any property investor or renter in Australia.  I recommend it for everyone!

Learn more about the book here.  To purchase the book, click the image.  Happy reading!