A U S T R A L I A N P R O P E R T Y I N V E S T O R S | SPECIAL EDITION
Australia’s Leading House & Land Package Specialist
FINDING THE TOP PERFORMERS IN AUSTRALIAN REAL ESTATE Discover How To Create Real Estate Investments At Cost Price & Take A Developer’s Profit Upfront! Understand The Key Factors That Are Driving The Aussie Real Estate Market How To Avoid The Mistakes & Horror Stories & Make Real Cash-Flow How To Accelerate Your Wealth Creation Using Super
Brendan has been truly an inspiration to me and with out his help and expertise I would still be owning two under performing homes and not getting ahead. Thank you Brendan. Alex Tran, NSW
Australia’s First Magazine Dedicated To Sourcing Genuine Wholesale & Developer Opportunities For Cash Flow & Capital Growth
MESSAGE FROM THE EDITOR In This Issue... Market Fundamentals 2012...page 3 The Ultimate Key to Wealth...page 4 Critical Lessons For Real Estate Success...page 6 10 Biggest Mistakes of First Time Property Investors...page 9 Must-knows before Buying Property Through Your Super Fund....page 10 Why Think About Retirement Now?...page 12 Property Deduction Basics...page 13 Falling Interest Rates: Impact on Aussie Real Estate...page 15 The Big Debate: Regional versus City...page16
and much more.....
Welcome to the first edition...
Inside This Issue
Although a few people still call me a ‘young lady’, I have witnessed a few boom and bust cycles...so I can’t be that young. I recognise that when times are tough, a level head and a passion for learning are paramount. Few would argue that globally, economic times are tough for many. Investors are trying to decide how to best tackle the property market in its current state. It is no longer the case that buying anywhere in Australia will guarantee you a good return of 10% on 10% every year. Now more than ever, the capacity to find the ‘diamonds in the rough’ is critical. Strong team support, access to cutting-edge research, planning and monitoring are critical to success and wealth creation in this market sector. I know people who are making substantial money in real estate and will continue to do this because they understand how to merge the elements of the game. I also know plenty of people who have made as little as one or two poor
investment choices which have left them hamstrung. For most of us, the quality of every investment into property that we make is crucial. It ties up our cash and limits our borrowing capacity. Most of us can only take on one property at a time, so if we accidentally buy something that doesn't prove fruitful, it can massively slow us down and impact our wealth, lifestyle and stress levels. It is never too late to start thinking about becoming a property investor. It’s also never too late to stop, smell the coffee, and assess whether what you have been investing in makes sense. We hope you enjoy this magazine and reach out to us with ideas for what you might like to see in future editions. Warmly
rn Salena Kulka
Discover how you can make a ‘Developer's Profit’ by calling 1300 879 608 | www.HomeAndLandAustralia.com.au
and lower delinquency rates through 2012. ANZ analysis of long-run trends in house prices, household income andmortgage interest rates (ignoring other drivers of house price growth, including housing market balance and lending criteria) showshousing the recent softness (in in th ! mortgage Previous episodes of improving affordability Australian house prices has been mainly driven by weak household sentiment rather than economic fundamentals, reductions in interest rates (and steady growth in househo with prices continuing to fall below expected house prices atand current household levels and in mortgage rates. expectations of income moderate growth household income are expected to be more by household Cross-country comparisons using partial valuation measures2012-13 - often used to contend thedriven case of overvaluation of inc
Market Fundamentals [NOW|FUTURE] !
$700,000 The pace of investing in Australian real estate barely slowed in 2009 and early 2011. Assessment of the current $600,000 market shows that many investors are staying out of the $500,000 market, though not because of financial stress, but due to a worsening$400,000 of market sentiment. While evidence does support that$300,000 mortgage delinquencies increased though to 2011, this rate has fallen since then. $200,000
$100,000 Despite continued concerns about over-valued property in Australia, the $0housing fundamentals are just getting 87 89 91 93 95 97 99 01 03 05 07 09 11 stronger. -$100,000 Softening house prices, rising household incomes and lower mortgage interest rates have continued International house prices to improve Australian housing affordability. Comparable levels of affordability haven't occurred since 1998. This is reflected in improved consumer expectations of the best time to buy a house. Continuing on a bright note, competition for limited housing finance and RBA monetary policy has contributed to lower mortgage rates. NZ
90 70 50
Mortgage costs as % of mean household disposable income
Australia is 40a large country with many micro property 35 markets in place. As such it is hard, if not inappropriate, to make sweeping statements about property performance 30 being the same throughout Australia. Each regional 25 market has its own trends, drivers and market performance.20
20 170 -60 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Housing affordability (lhs)
Recent growth in first home buyer housing finance signal affordability and tight market fundamentals. The removal 80 existing homes from 1 January 2012 has temporarily dam 60
House price to income ratios continues to drive Indicators show that household caution Sydney Melbourne Brisbane Adelaide Perth Hobart underlying fundamentals. While recently showing some g market, prices) remains soft, fuelled by global economic a 140 6 behavioural shift towards increased debt aversion.
Despite 2011 Census data showing the Australian populat 40 (-294,000), population growth and underlying housing de 3 20 a significant pressure on the housing stock. Consequently * Calculated for 20% of capital city house price 0 Australia UK shortages, NZ Canadaparticularly in the remain generally solid.USSkills 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 2 driven recent increases in net arrivals, indicating populati Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Household disposable income weak outlook for residential construction, we expect the B u STATE/TERRITORY UNDERLYING HOUSING MARKET International rental yield NSW VIC SA TAS ahead, pushing rentalQLD vacancies lower,WArents higher and e NSW housing market balance Aust House prices US UK
'000 180 12
Australian capital cities average
$000 (sa) Annual % change (trend) Rental yield (%)
House price index (March 2002=100)
Melbourne Institute-Westpac consumerpurchasing sentimentpower index:over house indicator * Represents the average households the purchase median priced home(trend, inverted rhs)
Housing construction has weakened over the last 12 months due to poor market sentiment, finance constraints for developers and softening house prices. There is also increasing pressure on the housing market due to an accelerating net immigration. So while the outlook for residential continues to soften can expect further Housingwe affordability deterioration50 in the supply demand balance and also expect further upward pressure on rents. 45
MARKET ACTIVITY CONTINUES BE05 DRIVEN Mar 84 Mar 87 Mar 90 Mar 93 Mar 96 Mar 99 MarTO 02 Mar Mar 08 Mar 11BY W House deposit* affordability, capital cities House price to average household disposable income ratio % of average annual state household disposable income
* Represents the average households purchasing power over the median priced home ** Calculated using trend discounted variable bank mortgage rate *** Calculated using average household disposable income
Mortgage House price deviation from house repayments purchasing power (% of of actual mean house household disposable income) (% price)
Interest rate contribution to simulated house price** Income growth contribution to simulated house price*** Actual house prices
House price to purchasing power*
Better time to buy a home
House prices and house purchasing power*
Index Worse time to buy a home
Australian house prices - continue to reflect broader economic and housing market differences, while revealing ! Despite Melbourne house prices experiencing the largest f rental little about the future direction of house prices. These measures, including house price to income ratios and least affordable to purchase across Australian capital cities yields, do not address ‘other drivers’ of house prices, including economic growthhas and unemployment, population house price growth maintained Perth house deposit af growth, housing stock, net household wealth, household financial stability, government credit risk Australianpolicy, capitalhousing cities compared to eq (ranked 6th across and mortgage lending standards. Housing affordability
500 1208 45010
4006 80 8 350 4 60 300 6 2502 40 200 4 20
00 01 02 03 04 05 06 07 08 09 10 11 Those regional markets benefiting from their proximity to 10 100 2 -20 MarSurplus 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 96 Mar 98 Mar 00 Mar 02 Mar 04 Mar 06 Mar 08 Mar 10 Mar 12 resource richJan areas will continue to drive local housing Sources: ABS, RBA, Residex, Melbourne Institute-WBC, ANZ 50 91 93 95 97 99 01 03 05 07 09 11 13 Sources: ABS, RBA, Data-Rismark, S&P/Case-Shiller, Teranet National Bank, Global Property Guide, ANZ markets, while cities such asRPBrisbane, Perth, Adelaide andNationwide, RBNZ, 0 86 88 Queensland 90 92 94 housing 96 98 market 00 02 balance 04 06 08 10 12 Darwin are also expected to experience the flow-on 90 '000 Population growth effects of the resource boom. 400 80 US
The majority of Property experts agree that average Australian house prices should continue to drift sideways to slightly lower for the next 12 months. So the challenge then becomes, if the average price of real estate is going to do very little in the short to medium term, where can you find properties than outperform this average? The answer: work with people who are dedicated to finding the pockets of Australia that outperform the rest of the country and who can show you how to accelerate your wealth.
300 50 Annualised - 000's
20 200 10
-20 Surplus 50 91 93 0
-10 95Net 97 99 Movements
03 05 07 09 Net Overseas Migration
WA housing market balance
Housing finance Investor
First home buyer
80608 | www.HomeAndLandAustralia.com.au Completions Discover how you can make a ‘Developer's Profit’ by calling 1300 87930
3 2 1 0
WHY MINDSET IS THE KEY TO WEALTH... I am sure you have heard people say, “It’s not what you earn, its what you do with it that ultimately determines the financial comfort and wealth you have during your life.”
As a young adult, someone bought me the children's book called the ‘Richest Man in Babylon’. It was an entertaining fable which told of how you can create great riches by applying some simple rules for how you spend your money. Despite its simplicity, I must admit it was quite an eye opener for me. I love hearing stories of g reat investment success. The 22-yearold young man on an average salar y who owns three investment properties. The single mum who bought her first property out of desperation for a better life and accumulated a $5 million portfolio within a few years. So why do some people achieve what so many others don't? Why have they been successful beyond the wildest dreams of the
people around them? Are they super smart or did they inherit a huge amount of money? Do they earn a huge salary? As Jim Rohn says “It's not the prevailing wind, but the sail you set that determines your success” That is, its not the circumstances, but their approach that give them an advantage. The right mindset is an essential foundation.
Lets review the facts.... According to the Australian Tax Office more than 1.2 million Australians own an investment property. That's around 1 in 10 adults. However, the number of investors who own five or more properties drops dramatically to less than 14,000 and an even smaller handful own more than 50 investments. Despite more than 90 per cent of investors saying they thought property was a good investment for them, most have been unable to focus on expanding their portfolio. Why?
The question is how do you avoid being an average property investor? The answer is to develop a burning desire.
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It doesn't matter what you do in life. Whether you are an aspiring Olympic athlete, an artist or property investor, desire is an intriguing aspect of the ability to achieve greatness. Some people are born with extraordinary natural talents, but these are wasted due to their lack of desire or drive to achieve. Some of us are not extraordinary, but with extraordinary desire and drive, we can achieve what most would think impossible. There is a great saying: "necessity is the mother of all invention". Bottom line, if your need is strong enough you will find a way to change your circumstances. The flip side of this is that if you are comfortable in life with a fair paying job and food on the table, it can be difficult to create a strong desire to get out and take action.
Almost all of the successful property investors I have worked with have either had, or been able to create a burning desire for success. It might have come from a need to urgently generate enough money to retire comfortably, from hating their nine to five job or because something rumbling within them wants them to be able to buy an expensive house or a fancy car. But for many people these goals are not enough. They need something bigger. Have you ever thought about having the financial freedom to take a long holiday every year with your family? What about having the money to help friends or family or others in your community? Whatever it is, the goal has to be bigger than just you if you want the greatest chance of succeeding. The most important step in setting a path to create wealth is to determine what will fuel your desire. The stronger your emotional responses to this vision, the greater chance you have of being able to break through and achieve it. Discover how you can make a â€˜Developer's Profitâ€™ by calling 1300 879 608 | www.HomeAndLandAustralia.com.au
CRITICAL LESSONS [FOR REAL ESTATE SUCCESS]
 Find a mentor and suppor t network Over the last 10 years, it has become the norm to seek out a coach in many areas of life. Personal trainers, business coaches and counsellors help people achieve their goals every day. Find a professional property mentor or simply someone who you know can support and encourage you and keep focused on your goals is invaluable. Make sure they understand what is driving your desire and how you will measure success. Your mentor will also need to be able to get tough with you if you veer off course.  Create a plan “To fail to plan is to plan to fail”. Most of the 1.2 million Australians that own investment properties could be described as "accidental investors". Their lack of planning prevents them from being one of the 'fortunate' 14,000 Australians who own 5 or more properties. Worse still, lack of planning can lead to investments that cost you. If you plan to use property as a vehicle to create wealth then you need to develop a plan to achieve your investment goals.
 Enliven your strategy Figure out how you are going to tackle the property market. Investors with large portfolios follow their investment strategy vigorously. Some go for capital growth properties and others prefer positive cash flow properties or a blend of both. On top of this, there are developments, renovations projects, house and land packages, etc etc. Figure out what you feel good about and then stick to it.
 Buy on mathematics, not emotion Do the numbers on each potential investment and be prepared to walk away if the property does not match your criteria. There is a saying in real estate; "The deal of a lifetime comes up every week".
 Learn from your mistakes Consider them not as a cost but as an investment in your future success. Be determined to make up for mistakes with future decisions that will more than compensate for the earlier learning.
 View finance as a tool, not a burden The whole point of using banks and other lenders to help you finance property purchases is to maximise your advantage and leverage your dollar. Don't get annoyed with the banks. Figure out how to use them to your best advantage and work with someone who knows the in's and out's of many lenders.
 Work to your strengths If you find a property sector that works for you, stick with it and don't listen to the doomsayers if your experience says what you are doing works for you.
 Exploit your risk profile There are two ways to become involved in real estate. The easy way and the hard way. There is nothing worse than acquiring real estate that causes you stress and squeezes your lifestyle because of cash burdens. If you are an aggressive investor, maximise your borrowings with a clear conscience, but make sure the "sleep at night" factor is balanced with the reality of your cash flow.
 Look and listen Talk to other investors. Learn and observe what they have done and what worked. Not all successful investors were a success when they started, but they learned how to improve their chances of winning while reducing their risks.
 Get off the couch and take action We are lucky enough to live in a country where the amount of energy you can devote to wealth creation is up to the individual. As the saying goes, “Success is 10% inspiration and 90% perspiration.”
Discover how you can make a ‘Developer's Profit’ by calling 1300 879 608 | www.HomeAndLandAustralia.com.au
Could look like... “I would never invest in the current property market",
Could look like... "There is no time like the present"
"interest rates are going up" "I don't have enough time"
"If you want something done, give it to a busy person",
"some people have all the luck"
"Create your own luck"
"I should have bought that property five years ago"
"You miss 100 per cent of the shots you never take"
"Nothing ventured nothing gained"
"The best time to plant a tree is 20 years ago. The second best time is now". “I bought that property five years ago"
Where are you currently? (i.e. what is your current net wealth, passive cash flow, lifestyle and how much time is devoted to aspects of your life?) Where do you want to get to? (i.e. what is your desired net wealth, passive cash flow, lifestyle and how much time is allocated to achieving your goal?) What actions do you need to take? These need to be specific, measurable, realistic and set against timeframes. How are you going to monitor your overall progress? What support, education and resources do you need?
In Summary It is important to view property investment as a business, not a spare time hobby. The only person who can create the life you want is you. There is no magic or massive secret. The only thing between you and a property portfolio that can provide you with financial freedom...is you.
EDUCATIONAL WEBINARS AUSTRALIA WIDE
Login from the convenience of your own home. This is completely FREE and all that is required is a computer and internet connection. Check online for the next webinar... WWW.HOMEANDLANDAUSTRALIA.COM.AU/WEBINAR
Time-Sensitive Online ‘Investor Briefings’ Home and Land Australia are pleased to present a fresh perspective on Australian real estate. Join us as we reveal: ★ Why you should be watching the Australian real estate market right now ★ The 5 primary strategies for investing in Australian real estate ★ The challenges in the current market and how to overcome them ★ How to achieve developer’s profits and acquire property at wholesale prices ★ A strategy that can effortlessly increase your retirement nest egg by $1,000,000 over 10 years ★ The impact of resources boom on Australian real estate across the board. ★ How to use your superannuation to construct a property and how to have this paid off in 7-10 years.
“I had been so random with my Australian property investing and wealth creation till now. It is so great to have met a team that combines Strategy, Financial Planning and Accounting with Real estate know-how. I will make $100k in 9 months on my first deal, which is more than on any other property deal I have ever done” Brent
BIGGEST MISTAKES OF FIRST TIME PROPERTY INVESTORS  Buying For the Right Reasons Property Investment is all about making money, not about owning the prettiest property in the street. While it might be comforting to know you are buying in your own city/suburb, it may not be the best use of your money. Just remember every property you buy ties up a lot of money. Make each investment count.  Buying the Building, Not the Land Another common mistake is to buy units rather than houses. Many investors go for these because they are in areas that are more affordable and more desirable. However, historically houses have a higher growth rate than units. This is because it’s the land that grows in value, not the property on top of it. Most project and property marketing companies promote units rather than houses, not because of a greater return, but because they are more available, they get better commissions and it is easier for them to sell.  Buying on Personal Taste Many first time investors go looking for the perfect property and are more concerned about the colour schemes and aesthetics rather than the area the property is in. A good investment will appeal to the broadest section of buyers and renters, not necessarily to one’s own specific tastes. Be as neutral in your choice of colour and style as possible.  Financing With the Wrong Money How you structure your finance when investing is critical. Many home owners use their savings as a deposit. If you have a home loan, you are better off to use your savings to pay down that debt, and use the equity in your property to borrow 100% of the investment property price and costs. This is because your investment loan is tax deductible and your home loan is not. There is no point paying a cent off your investment loan while you still have non tax-deductible home loans. So your investment loan should be interest only.  Tying Your Loan to Your Home A common mistake when investing is to just go and see the bank that your home loan is with to arrange your finance. While they may lend you 100% of the purchase price & costs, they will usually cross-collaterise the investment against your home. This is an advantage to the bank and the bank only. Speak to a finance broker who knows their stuff.
 Lack of Patience Poor choices often lead many investors to sell their property after a couple of years, so they don’t achieve the results they desired. Property is a medium to long term investment and while you can achieve great returns quickly, you cannot expect your property to double in value overnight.  Waiting for the Perfect Time to Invest Many investors wait until their home loan is paid off before they invest, or wait until the media start reporting that it is a good time to invest. The media report on things that have happened, so if you wait for them, you may miss ideal buying opportunities.  The Cash-flow Downside It’s easy to fall into the trap of poor cash-flow management as a new investor. Understanding the costs involved in acquiring and holding property can be difficult. You must be sure that you can afford to hold onto any property you buy. In other words, how much income will your investment(s) generate and will it be enough to cover your outgoings? If not, can you manage any shortfall?  The Cash-flow downside When you fail to plan you plan to fail. Itʼs an old adage but very true. Successful wealth creation through real estate requires you to set goals, determine where you want to end up, and then devising a cohesive plan to get there. You need to focus on both the short and long-term and ensure your investment decisions gel with your overall strategy.  Forgetting to Review While property investing is a long term strategy, any portfolio needs a periodic review and re-assessment. Speaking to your advisors about cash flow, tax, speeding up your five or ten year plan to take advantage of changing market conditions – these are all ways to stay ahead of the game.
What You Must Know Before Buying Property Through Your Super Fund... Do you have control of your superannuation, or are you happy paying 9% of your salary to an investment manager who still receives remuneration even when they lose your money? Perhaps a Self Managed Super Fund could be a vehicle to effectively increase your wealth in retirement. Home and Land Australia has an exclusive arrangement with the only builder in NSW who can construct house and land packages inside of superannuation. These are quality homes that all have upmarket inclusions. We can show clients how through the use of Salary sacrificing, these investments can be paid off within 5-7 years giving you a house with no debt and generating up to $25,000 a year of income – TAX FREE !!!! Also upon sale of the property you would be able to sell TAX FREE and pocket the FULL value of the house. This is an easy way to have an extra minimum of $500,000 in superannuation. Recent changes in Superannuation allow super funds to borrow to purchase property is the biggest thing to happen to the property investment sector since the introduction of negative gearing. With the rising uncertainty in the global financial markets, many people want to diversify their risk through property.
Why Would You Use Super To Invest In Property? ★ Invest in the ‘bricks and mortar’ of property ★ No capital gains tax once you reach age 55 and maximum 10% CGT prior to preservation age if asset held for greater than 12 months ★ A maximum of 15% tax on rental income ★ With salary sacrificing we can show you how to pay the house off within 5-7 years leaving you with an asset worth half a million dollars ★ Asset protection – the lender has no recourse of your personal or other superannuation assets ★ Simplicity ★ Ability to borrow – gearing
Discussion among Financial Advisors, Accountants and the Media regarding managing superannuation is commonplace today. A Self Managed Superannuation Fund (SMSF) is becoming a popular structure for individuals wanting to take charge of their own retirement wealth. Couple this with the fact that Australians love real estate investing, and this is definitely a great way to bring forward retirement and maximise your retirement nest egg. The one problem in the past has been the fact that SMSF’s couldn't borrow. Happily though, recent change to legislation has created a new opportunity to diversify into property using the leverage of borrowing to buy real estate.
Things to bear in mind: ★ A SMFS will be the beneficial owner of the property and is able to purchase any kind of real estate provided it is as an investment. ★ The terms and conditions that most lenders offer a SMSF will differ from regular investment loans. For example the loan-to-value ratio that some lenders offer can often be between 60-85% for residential property and even lower for commercial property. ★ While investing through a SMSF seems to excite many people, it is really important to make sure you get expert qualified advice to support you and to ensure that this is a good option for you. ★ Costs relating to the property such as taxes, property management costs, bank fees, repairs and maintenance etc, are paid by the SMSF. Similarly because the property is "beneficially owned" by the SMSF, it also receives all proceeds of rent or other income and can improve or renovate the property as any other investor may. ★ Once the mortgage has been repaid in its entirety, the title to the property can then be transferred to the SMSF or the property trustee can continue as registered proprietor.
Purchasing property in Super is a lot easier and cheaper than you think. Whilst a Self Managed Super fund does come with extra compliance and regulation, House and Land Australia have teamed up with industry experts and we will help you facilitate the transition to your own Self Managed Super fund.
YOU SHOULD THINK ABOUT RETIREMENT
The sad fact is that the majority of people will retire on less that $15,000 per annum. Given that life expectancy for men will increase to 92.2 years of age and for women 95 years by the year 2050, we need our money to go further. According to a survey by the Association of Super Funds Australia (ASFA) and Westpac, a comfortable retirement now requires an annual income of almost $40,000 for a single pensioner and $50,000 for a couple. This level of income requires saving a minimum lump sum of $800,000 to $1,000,000 by retirement and that is in today’s dollars. Unfortunately our compulsory contributions will not be enough to see us into retirement and unless we are salary sacrificing there will be a large gap.
It is possible to invest in cash-flow positive properties for as little as $10 a week for lower income earners. Diverting money that would normally go to the government into your property portfolio is a great tool for not only reducing your tax but also for creating wealth.
This needs to be addressed as a short, medium or long term strategy depending on where you are in your working career right now. Start the ball rolling now to becoming ‘retirement savvy’ and educate yourself on your retirement options. No one else will be preparing a rescue plan for you. Making the decisions right now could be the difference between retiring broke, retiring on the minimum pension, or retiring comfortably. By making these small adjustments right now and not relying on the government during retirement will potentially mean a much happier retirement when you deserve it the most.
PROPERTY DEDUCTION BASICS One of the great benefits of owning property is that it can be an effective vehicle for reducing tax. Costs you incur in buying or maintaining a property can either be tax deductible, or form part of the cost base (which then reduces any possible capital gain).
Quantity Surveyor Costs or Depreciation Reports If you build a new property or you renovate a property it can be useful to use a professional to prepare a schedule outlining possible deductions. This cost is fully deductible in the year it is incurred.
Seminars and Publications Provided you can argue a case that these relate to your investment, these can be deductible. For example, books on tax, property magazines, Financial Review newspaper. Seminars are a bit tougher, since it needs to relate to producing income from a property. For example, when a seminar teaches you how to find a good property or renovate it you can't necessarily claim a deduction against the rent for the cost of the seminar. You might be able to include it as part of the cost base of a property if you can link the seminar to that particular property.
Stamp Duty Stamp duty incurred on a loan is deductible over five years. Stamp duty on the purchase of the property forms part of its cost base.
Travel The primary purpose of the journey is the focus here. If the primary purpose was regarding your property then you can claim the cost. If the trip has any element of personal reason then the costs must be apportioned on a time basis between the deductible purpose and the private purpose.
Fees to Financial Planners/Accountants The fee paid to an investment advisor for drawing up a Financial Plan is not tax deductible but it can be included in the cost base of a property investment. Only ongoing fees for monitoring your portfolio are deductible. Some financial planners have a ruling stating that their fees are tax deductible. Accounting fees relating to the preparation of your tax return are deductible. Finance Broker costs are deductible over five years as part of borrowing costs.
Buyers Agent Fees These form part of the cost base of the property, so are only claimable when the property is sold.
Solicitor/Conveyancer Fees Fees to recover rent or draw up a lease are deductible when incurred. Solicitor's fees relating to the property loan are deductible over five years. Conveyancing costs are included in the cost base of the asset for capital gains tax (CGT) purposes.
Building Inspection and Pest Report These costs will form part of the cost base of your investment property.
Valuation Fees If the valuation is just for your own peace of mind then it forms part of the cost base. If it's for the bank then it’s a borrowing cost so it can be amortised over five years.
Real Estate Agent The commission you pay on the sale of the property is included in its cost base for CGT purposes. Fees you pay to a real estate agent for managing your property are deductible when incurred.
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WHATâ€™S YOUR NEXT STEP? It doesn't matter where you are on your investment journey; there is always more to learn, fresh ideas and exciting new markets that are yet to be explored. One of the best things about property as a vehicle for wealth creation is that it caters for lots of different people and their preferences. There is no one size or strategy to fit everyone, so talking to someone who can tailor a solution to your personal circumstances is essential. Home and Land Australia can actively work with you to review or identify your personal goals. They can bring to the table their diversity in experience and help accelerate the goals you've set yourself. If you are ready to move towards the financial freedom you and your family deserve, then take action right now and get in touch with us for a no-obligation one-on-one consultation for a tailor made solution.
CALL 1300 879 608
FALLING INTEREST RATES IMPACT ON AUSSIE REAL ESTATE It is a pretty strange time right now in the Australian economy. The rest of the world is struggling with economic mayhem. Meanwhile Australia has fared relatively well after the Global Financial Crisis and is continuing to do its best to stay on an even keel. Most recently we saw the Reserve bank drop its interest rates and some economists have predicted more cuts in the future. Investors are questioning how this might affect the property market.
Australia’s Two Speed Economy More references to Australia’s ‘Two speed Economy’ are commonplace now.
On one track the mining and resources sectors boom, attracting more and more highly paid workers, and pulling in some seriously big dollars. On the other hand, the average Australian is not feeling particularly prosperous.
At this point, many people are scratching their heads trying to understand how the resources boom will help them.
So why do Australians still feel doubt? Lower interest rates are shaving down the mortgage costs for many home owners. As the pressure on households is reduced and borrowing become cheaper, confidence can be expected to return and have a positive impact on real estate. The reality though is that uncertain economic times and conflicting media reports are making the this change slow.
Some experts say the market is recovering, others say it is declining, others say it will remain flat. Bottom line, you can’t make sweeping generalizations about Australian property since it is such a massive market with vastly different micro
The average Australian home owner is making buying and selling decisions based on what they know and how they feel. This is what is driving the values of property in Australia.
economies. So who do you believe?
What should property investors do? The facts are that our population is growing, unemployment is low, property fundamentals are strong, the economy is not volatile and interest rate cuts are expected to continue. This is the year for smart property investors. There are still many micro markets of Australian real estate that are performing well. In fact, there are plenty of opportunities that exist for investors to ‘manufacture’ growth. Don't invest blindly. Many advisors are making property investment recommendations based on the commissions they receive. Do your own homework. Work with someone to help you assess your portfolio and help you identify how to continue to grow your wealth.
[INVESTING IN RURAL AREAS v BIG CITY] This debate has raged for a long time among veteran property investors. The turbulence of the last few years, combined with the resources sector’s growth has started to make this debate a little more one-sided. One of the most respected commentators on Australian real estate, Terry Ryder, is arguing strongly that key regional centers are the best place for investors to be focusing on given the current economic environment. In a nutshell, they are more affordable properties, which are achieving higher than average growth and higher than average yields. He argues that: ★ Infrastructure spending in these regional areas has increased. ★ Many Australians are viewing regional areas as more affordable places to live and with better lifestyle prospects. ★ Job prospects in a number of industries are growing as a result of the flow-on effect of the resources boom. In contrast, prices in many capital cities have either seen a slight decline, or have stagnated in a soft market.
Cash Flow v Capital Growth This is another extension of the same debate. It is argued by some ‘experts’ that you have to have one or the other. In other words, if you want cash-flow you need to compromise on growth, and vice versa. The truth is, that you can have both. There are pockets of Australia which offer you both. They can be harder to find, but if you know where to look it’s possible.
So lets lay out the advantages of cash-flow positive properties (the income is greater that the cost of holding it): ★ It doesn't cost you anything to hold this kind of property and in fact, can even put money into your pocket. ★ You can use the income stream to help you continue investing. Banks will look favourably upon this as it boosts your borrowing capacity. ★ They help balance cash-flow in a portfolio that includes negatively-geared property. ★ You are less affected by rising interest rates. Conversely a fall in interest rates simply boosts your income.
So where do you find these properties? Finding the diamonds in the rough is a great skill. There are plenty of investment opportunities that might give you the positive cash-flow, but perhaps not the growth. Getting involved in places where the growth has already happened might not necessarily be the best investment. The goal is to get in at the ground level and this often means lots of research. The experienced team at Home & Land Australia can work with you to understand how to effectively find and access these opportunities. ★ Regional centres with strong population growth and infrastructure spending. ★ Regional centres with well-regarded Universities and schools. ★ Regional cities that are reaping the reward of having proximity to resource based companies or those that have strong industries that support mining groups close by. ★ Regional centres that have properties with development potential and councils that are easy to work with.
"Generally, the best opportunities for long-term capital growth with solid yields are found outside the big cities." Terry Ryder
Australian Real Estate Commentator
Who Is Home And Land Australia?
Brendan has been involved in the finance and investment industry for 15 years, having worked for some of Australia largest Stockbroking and Financial Planning companies. His time with these companies showed just how volatile the share market was and conversely, how stable, safe and lucrative the property market had proven to be. After leaving the corporate world, Brendan has dedicated himself to working with clients to help them achieve their financial goals through real estate. He is a licensed financial planner, holds a full Real Estate Licence and is a self confessed ‘property geek’ who through dedicated research, has built immense knowledge and understanding of current market conditions He has worked along side some of Australia’s biggest property developers and his active approach to property investing has led him to develop a long list of personal relationships with numerous successful builders, councils and land owners. Brendan has been actively involved in wealth creation for over 15 years, and has been responsible for creating millions of dollars of wealth for his clients.
Salena is a Chartered Accountant whose career started in the Corporate world. She has worked for a number of high profile companies, both here in Australia and overseas. In the year 2000, her passion for real estate and business led her into the world of property investing and business. She has worked with hundreds of investors over the last 10 years to help them understand how to take advantage of ‘golden’ real estate opportunities. Salena is passionate about helping Australians access property investment opportunities that allow them to create financial freedom in their lives.
Our experience is extensive and spans knowledge of Financial Planning, Superannuation, Accounting and Real Estate. We are advisors who practice what we preach. If we are recommending a particular opportunity it is usually because we have invested there too.
Mini-Development CASE Project STUDY [ALEX] Alex Tran was purchasing old properties in the Hunter with the expectation of capital growth. Having purchased two properties in Edgeworth, Newcastle, what he ended up with was problem tenants and non-stop maintenance issues. Alex met Brendan in 2004 and subsequently sold his Edgeworth homes at small profit. Alex learned from Brendan what to look for when developing houses and with Brendan's help he has has bought two homes on large lots. Under Brendan's guidance he renovated the front houses and sub-divided the back lot and built 2 X 2 bedroom villas. On his next purchase he sub divided the back lot into 1 X 2 bedroom villa and 1 X 3 bedroom villa. From these two developments alone, Alex has managed to turn his non performing old houses into a portfolio now worth $2 million and generating rental income of $117,520.
...a portfolio of $2 million and generating rental income of $117,520.
“I am now moving onto my next development, where we are building 2 X 3 bedroom dwellings on a corner block. I am expecting to make $160,000 upon completion. Brendan has been truly an inspiration to me and without his help and expertise I would still be owning two under-performing homes and not getting ahead. Thank you Brendan.”
Mini-Development CASE Project STUDY [SALENA] Salena was interested in doing low risk small developments. She had been involved in a number of high stress bigger developments and was now committed to growing her wealth slowly and with low risk projects. We figured out that small Duplex sites would offer her the best value for money with quick turnarounds in build time and solid profits.
...during the project we made about $200k.
The first project was 2 x 4 bedroom spacious homes. The second project was 2 x 3 bedroom villas.
“I met Brendan 2 years ago and was immediately struck by how generously he shared his knowledge. After spending a long time quizzing him and checking all the facts and figures, I finally asked him to help me find my first project. I had already done one duplex development in Melbourne, which had been a harrowing experience, so although I knew the mechanics of how to put a deal together and make it work, I didn't want it to be such a stressful experience. Brendan handled everything. He found the land, negotiated me a discount, found the builders, liaised with the designers and the council to handle the approval process. He also made sure all building works went smoothly. In the first project I was amazed to find that because of capital appreciation during the project we made about $200k. If I keep these properties they will offer massive positive cash-flow and are expected to have strong growth in the next 5 years. Either way its a win for me. I have been so impressed that I asked him to find me another project. This second project is another duplex and based on conservative current prices, I will make a profit of about $150k. The plans are due out of council shortly and it is expected to be another quick build. I am 100% confident about working with Brendan. So much so, that I have already referred a few of my friends to him.”
Manufacturing Growth Through House & Land Packages
[TOM] Tom meet Brendan in 2007 and purchased his first investment property through him. His main motivation for getting involved in real estate was that he had been on a good income and paying too much tax. Through analysis of Tom’s situation, Brendan showed him how through careful investment in house and land packages, he could improve his tax and cash-flow position and reduce his tax
Our first investment was a house & land package at a cost of $360k in Newcastle & has made us $100k profit.
“Brendan showed me how to reduce my tax and also use property as a tool to help me on the path to financial freedom. Our first investment was a house and land package at a cost of $360,000 in Newcastle and has made us $100,000 profit. I have already completed my second investment home and am going to use the equity from this one to purchase my third. Brendan has already created substantial wealth for me and by using the depreciation I have been reducing my tax and also using those savings to pay off my mortgage.”
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Lot 2516: Cost $399,500 [value on completion $480,000]
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Lot 523: Cost $404,500 [value on completion $455,000] !!!"#$%&'#&!(')%*+'(!,%&$!-"'"
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!"#$%#&%'()#*+", Standard Quality Inclusions $399,500
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Lot 2516 Cameron Park
Examples of Full Turn-key Packages!"#!$%&!!'(&)* Available !
ph:1300 879 608
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