Property News Australia.com.au

Almost three-quarters of Australians believe now is a good time to invest in property, a report has found.

This article is brought to you by Mozo – Helping you compare home loans

The latest Citibank Australian Wealth Report revealed that 74 per cent of respondents consider property to be their best option for investment. A savings account, fixed-term deposit or cash management trust was the next most popular option at 68 per cent, the Australian reports.

Citibank’s survey, conducted by Newspoll to cover a national sample of 1,085 people aged 25 and over, found that investing in shares was the least popular choice at less than 50 per cent, the report added.

Andrew de Graaff of Citibank said that following the financial crisis people were keen to have stable investment options for their money.

“The perception we got from the survey is people are just wanting to get that sense of security again,” he told the news provider.

The findings suggest that many Aussies are now inclined to compare home loans and to compare term deposits in search of the best deals for their money.

This week Lisa Montgomery, head of consumer advocacy at Resi Mortgage Corporation, told the Australian Associated Press that many homeowners face having to remortgage their properties as a result of rising interest rates next year.

Source -Mozo.com.au-Thursday 31 December 2009

An Australian Property Investor - Case Study

Investing in bricks and mortar could be the key to a rich retirement, if you have the right advice, says investor Brian Doughan.

Brian Doughan turned to property investment in 2001, at the age of 47. He had been working as a schoolteacher for 20 years, and despite his efforts to build a decent superannuation, he realised that movements in the share market prevented him from building a secure retirement fund.

“In December 2001, I had what I like to call a life changing ‘aha’ moment,” says Brian. “I looked at my two superannuation funds and saw, with horror, that one fund had actually decreased by $6,000 in six months. I found myself asking questions like ‘What is the name of my super fund manager?’, ‘What are his/her qualifications?’ and ‘Why am I paying this unknown person commission to lose my money for me? I could just go to the racecourse!’”

After the shock wore off, Brian and his wife Carmen decided to take control of their future.

“Our house was worth $750,000 at this stage and we only owed around $200,000 on our mortgage, which left us with plenty of equity,” says Brian. “My decision was to use this to invest in property. At least with property, Carmen and I are in control, we decide where and when to purchase.”

In February of 2002 Brian and Carmen began inspecting the property market and familiarising themselves with the world of investment. However, as they soon found out, choosing the right property isn’t an easy project.

“We were babes in the woods when we bought out first property for investment,” says Brian. “We chose to buy older style two bedroom apartment with waterfront glimpses in Wollongong, NSW because it was close to Sydney and it’s a beautiful area. We were rapt with the place but we later realised that the $270,000 we paid was way too much.”

Buying with their hearts and not their heads was their first mistake, says Brian. Still the Doughan’s decided to hold onto the property and today, it is worth $310,000 and rents for $245 a week.

Brian and Carmen wanted to continue buying investment property but thought it was necessary to seek some expert advice to ensure success with their next purchase.

“Some friends of ours told us that they had an acquaintance, Ian Hosking Richard from Rocket Property Group (an investment real estate and finance company), who had helped them find investment properties which have performed well,” says Brian. “So we met up with Ian and we were impressed with his knowledge, honesty and complete lack of pushiness.”

In March 2004, Brian and Carmen used Ian’s services to purchase their next property – a $198,000 one-bedroom unit on Chevron Island, Queensland.

“The price was right and the area was steady so we bought it. The property is now worth $235,000 and rents for $240 a week,” says Brian.

Brian says the most comforting thing about seeking Ian’s advice was that he invested in the same locations he suggested to his clients. “It certainly lends a lot of credibility to what he is doing,” says Brian.

Since 2004 the Doughan’s have purchased four more investment properties. While they have taken gambles that put them outside their comfort zone, Brian says it has all paid off.

“In late 2004 Ian told us about an off the plan house in Townsville, which we were going to buy sight unseen. This went against all my instincts and I was very skeptical about the purchase because I had never been to Townsville (and still haven’t),” says Brian. “But we trusted the advice we were given and this has been one of my best investments. We bought the house for $230,000 and it is now worth $320,000!”

Today Brian and Carmen’s portfolio is worth $1.5 million – a figure that Brian says he is “completely astounded” by. Now 55, Brian enjoys investing in property so much that he has qualified for his Real Estate Agent’s license and helps others to get started in property investment.

“Investors aren’t multi millionaires, they’re just ordinary people like me, but what prevents many people from buying a successful portfolio is lack of knowledge,” he says. “I am still teaching but I am gradually spending more free time talking to friends and colleagues about property. Maybe one day I’ll make it my full time career.”

Brian Doughan’s investments

Wollongong, NSW (unit)

Bought in Feb 2002 for $270,000

Weekly Rent - $245

Current Value = $310,000

Chevron Island, QLD (unit)

Bought in March 2004 for $198,000.  Weekly Rent -  $240

Current Value = $235,000

Labrador, QLD (unit)

Bought in Sept 2004 for $230,000.  Weekly Rent -  $280

Current Value = $320,000

Condon, QLD (house)

Bought in May  2005 (OTP) for $262,910.  Weekly Rent - $330

Current Value = $350,000

Idalia, QLD (unit)

Bought in Sept 2008 (OTP)$279,000.  Weekly Rent - $320

Current Value = $330,000

Copyright Your Investment Property magazine and republished with permission.

Whether it’s just owning an apartment nearby a university or even investing in contracted student housing, investors can benefit from good yields and steady demand. But there are other factors to consider before you head into this market.

It’s been tempting of late to search for a recession-proof investment to carry one through tough economic times.

When unemployment rises and recession nears, traditional high rental yield earners of the past in the property market may no longer be such a reliable a source, especially in the high end.

There is a rental sector where it’s impossible for your tenants to lose their jobs and where demand remains usually steady, however – student housing. If gone about carefully, it can return higher yields and a steady demand that is not likely to significantly wane. Foreign students studying in Australia have perhaps made the largest impact lately in increasing this demand.

International enrolment last year went up by an average of 20.7% over the year earlier, according to government figures. This year, some universities are reporting up to13% increases in overall undergraduate acceptance rates. Taken in a larger context, international education contributed $14.2 billion to the economy in 2007-08, making it Australia’s third-largest export. The commodity of an Australian degree for Asian students is regarded in particular at a lofty level, and often at a significantly lesser price tag than universities in the US or UK. Some 79% international student enrolments came from the Asian region in 2008.

All these new students coming in have to live somewhere, naturally. While some on-campus housing is provided, many others live off-campus, either by choice or necessity. In Brisbane, for example, 47% of students are housed in share accommodation, with only 15% on campus, 13% living with friends and relatives, 18% in staying at home, and 7% purchasing their own property, according to Damian Haber, Principal of Queensland-based The Pad Management Pty Ltd. He says it reflects a trend towards more affordable housing.

“Often it is the case that new purpose built or on-campus accommodation is very high in cost and beyond the capacity of many students to afford,” he says. “A share accommodation provides a great alternative at a more affordable price range, hence the extent of its market share.”

That’s where investors come in, and many have already sought this specific field of housing which can provide great gains, as well as risks. Less than three years ago, student accommodation was not commonly out there in the marketplace, or even considered, says Haber, who also serves as President of the Student Accommodation Associations Industry.

“In more recent times, with the advent of the international student market and response from China and India to strong marketing by our university sector, as well as the push for high returns, student accommodation is now a household name and often filling the boards of real estate sales agents as an attractive investment strategy,” Haber says.

Greater yields, stability

One of the main reasons an investor might now choose student housing is for the yields. Investors in student accommodation can pack more income per square meter than they might with professional tenants. For example, one can turn a two bedroom unit into a four bedroom unit, or a three bedroom house into a five bedroom house.

“You can get quite a lot of tenants in one place, so the rental income is higher,” says Chris Gray, CEO of property portfolio company Empire.

Haber says student accommodations typically should return an income yield of between 6% and 8% for inner city residential, compared to what he says would be a 3% to 5% yield for comparable single tenancy arrangements.

No matter the location, the yields for student accommodation are almost always higher compared to renting to non-students. Gray says he knows a mortgage broker who recently turned a one bedroom house with a sunroom into a three bedroom, and now gets a 12% return.

That increased yield is just one of the many advantages, however. Haber says the latest increase in international students helps explain why just 10% of them have cars. With that in mind, student accommodation does not usually need a car space, unlike many single residence properties.

Another investment benefit is that student housing is often much cheaper than other similar housing nearby, says Gray. “It’s a low cost of entry,” he says.

If managed well, vacancy rates can be low, as well. Haber says The Pad puts students on a six month fixed term tenancy, but many students stick around for two or three years, he says. “Our tenancies run in blocks, which eliminates any potential vacancy over holiday periods,” he says. “We typically have a waiting list of students ready to move in if a vacancy arises and the universities are constantly in contact wanting to place more students.”

Having multiple tenants also can limit risk for vacancies. By diversifying the rental across multiple tenants, it means that if a tenant leaves, the income is still coming in and still typically above a single tenancy arrangement in net terms. Further improving this strategy would be to have a staggered entry profile, says Haber, thus likely ensuring income at all times, even when one tenant might be lost. “With a single tenancy arrangement, if the tenant does not renew, the entire income from the property is lost,” Haber says. Investors can really benefit by discussing their level of risk tolerance and mortgage repayment options.

See: Home loan calculator

Sometimes, just having three tenants of four possible in place is enough to still be profitable for an investor in student housing. The fourth tenant is just an added bonus.

Read more at Your Investment Property magazine.

Republished with permission.

Obtaining the best deal on Home Loans - Mortgages and Interest Rates in Australia

Currently, anyone who has a mortgage understands just how important it is to obtain the best deal possible with the banks. By carefully comparing and refinancing your current loan(s) you could save thousands of dollars off your mortgage, reduce monthly repayments and mortgage stress.

Below is a list of lenders, brokers and financial advisory services that may assist you with refinancing, reducing your current interest rate, mortgage and monthly repayments.

Xinc Finance Brokers
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Building approvals fell more than expected in August and the lack of building will force rents and house prices higher amid a lack of supply, AAP reports.

Building approvals fell 1.7 per cent to 12,751 units in August, seasonally adjusted, from a downwardly revised 12,974 units in July, the Australian Bureau of Statistics said today.

Over the year to August, building approvals fell 0.1 per cent.

UBS senior economist Adam Carr said housing construction was below national needs, and would drive up housing costs.
Higher rents and house prices would likely to add to inflation and force interest rates higher, Mr Carr said. He predicted interest rates would rise again in February, after nine rate rises in just five years.
APM’s general manager Michael McNamara told news.com.au that rents would continue to rise.  “Weekly asking rents in all capital cities are at record highs,” he said.

Although the climate was giving renters little relief, it was a good time to be investing in the property market as returns were growing, Mr McNamara said.

“Increasing gross rental yields are expected to drive stronger property markets in the eastern capital cities, especially in apartment markets,” he said.

“Investors will see stronger investment fundamentals as a reason to prefer property as an asset class”.

The research also found low rental yields in Perth meant its property market was Australia’s most over-valued, with returns on the year a meager 3.7 per cent, the lowest of all capital cities.

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Do you never seem to have enough money?

By managing your expenses so that you spend less than you earn, you will create spare cash to invest, meet unexpected expenses or save for something special. Spending less than you earn is easier said than done but FIDO’s Budget Planner can help you.

Finding out about your expenses and income
To manage your expenses, you first have to know what they are. FIDO’s budget planner uses a simple spreadsheet to sort your income and expenses, and calculate your weekly, fortnightly or monthly surplus or deficit. (If you don’t want to use the spreadsheet you can download a blank version of the planner in PDF format and write in your answers.)

Once you know what you’re spending your money on, you can plan to get your expenses under control. Stick to your plan, and you will soon find you have control of your money.

FIDO’s Budget Planner will help you work out what your regular income and expenses are. It’s much more thorough than planners you may have had to fill out for a loan, so it will help you draw up a really accurate picture of how you are managing your money.
What you will need
Set aside time to gather your information. You’ll probably need your payslip or income tax return, records of any other regular income, and as many of your bills, shopping dockets, accounts, credit card and bank statements as you can find for the past year.

Decide whether you want your plan to be worked out on a weekly, fortnightly, monthly or yearly basis. FIDO suggests you select your pay period so you can use your payslip for your income details.

Tips for more accurate results

Remember to use your after tax income.
Leave out any irregular income that you would not usually receive, for example overtime that is not regular or bonuses for unusually good performance.
Calculate all income and expenses consistently for the period you have chosen eg per week, per fortnight or per month. If you need help with this, the Budget Planner includes a converter to turn annual and quarterly payments into weekly, fortnightly and monthly amounts.
Check your payslip for any deductions (except tax) already made, for example superannuation, health insurance, company car. For the most accurate picture, add these amounts back on to your income and then include them in your expenses.
If you receive any income that has not been taxed, then deduct your estimate of tax due before entering that amount as part of your income. Dividends from company shares may include ‘imputation credits’, or tax already paid at the company tax rate as set out on your dividend statement. When you estimate tax due on dividends remember to deduct any imputation credits. Imputation credits reduce your tax bill.
Help given on screen
When you open the planner, you’ll find some things to help you use it. You’ll find:
1.  A converter to turn a yearly or quarterly amount into a weekly, fortnightly or monthly amount.
2.  A loan calculator to show you how much money you need to repay a loan within any number of weeks you choose.
3.  Pop ups with a more detailed explanation of various items. Get this by holding your mouse pointer over the red triangle.

Hints for first time spreadsheet users
FIDO’s Budget Planner is an Excel spreadsheet. You’ll find it easy to use even if you have never tried Excel before:

Key in the amounts for each item in cells marked with $ signs.
Use the Enter key to move on to the next item.
You don’t have to calculate the totals or subtotals - they are calculated automatically as you go. When you have finished, the spreadsheet will show your surplus or deficit income.

To download the spreadsheet visit http://www.fido.asic.gov.au/fido/fido.nsf/ef531319dbd6d282ca256afd001db469/a8b623072a4eb1bdca256e5f001eb443/$FILE/BudgetPlanner-v3.xls

Getting access to a broad range of lenders is one of the most important advantages of working with a mortgage broker. Like all businesses, different lenders have different strengths and one way to get a fast understanding of a lender’s products or service strengths is to look at the awards they have won. To give you an idea, here is a list of the awards won by the lenders X Inc mortgage brokers work with. Apart from different home loan product features, customer service is a high priority with most borrowers and a good mortgage broker can ensure that both they and the lender provide you with that.

Some of the awards listed here are for home loans, some for customer service, and some for excellence in the company’s structure, communication or people. In the extremely competitive finance market, our Mortgage Brokers are proud to be able to offer such a broad range of proven award winning products.

 To view more visit www.xinc.net.au/home_loans/awards.html