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Residential Property Investment Guide


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Disclaimer: The information contained in this presentation is of general nature only. The information and any assumptions contained within are provided in good faith. The content of this booklet is not to be relied upon as a substitute for financial, taxation, investment or other professional advice. Whilst the sources for the material illustrated within this presentation are considered reliable, responsibility is not accepted for any inaccuracies, errors or omissions. As such, LTG Goldrock Financial Services Pty Limited or any related bodies corporate are in no way liable for any loss, damage or expense connected to the use of or reliance upon information, opinions, recommendations, views or comments contained within this presentation. Exceptions of liability exist only in respect of any liability required to be assumed under Corporations Law. Information on specific investment options or products is neither directly nor implicitly recommended and advice should always be sought before deciding on the best investment for you based on individual circumstances.


Thinking of purchasing property? This guide is to assist you in buying property. It is completely unbiased and will help you to make a more informed decision. The guide is based on points, which are allocated to indicate possible strengths and weaknesses in certain areas. It is designed to remove emotion from the purchase and to help you deal logically with assessment and analysis. Using the guide allows a purchaser to compare the results with those of other properties they have assessed. Those properties showing most points will not necessarily be the best properties to purchase, however it will provide an interesting start-point. Contrary to the belief of many though, it is not in a purchaser’s best interest to be completely unemotional in the purchase. A healthy balance is in our best interest and the guide will help bring this out if used properly. For those couples using the guide, don’t be surprised if you have differences in opinion in the shape of the results. Each of you will read different things in the results and it is important for you to list out the pros and cons of the short listed properties you have formulated. From this point, in many cases, a joint decision can be made. Compare ‘apples with apples.’ Never use the guide to compare “Homes” with “Units or Townhouses.”

If you are considering both Freehold Title (Houses) and Strata Title (Units / Townhouses), separate the assessment into two categories. If you end up with two properties short listed, one being a house and another being a Unit or Townhouse, then you must compare from here the pros and cons of both. Finally, the guide is not an exam. Remember, it is not designed to find the best property based on points. If you wish simply to take rough notes on each area, the guide will stack up as long as you again compare “apples with apples.”

The guide has 3 sections: 1. The surrounding area: This section addresses the majority of key issues and services pertaining to the area surrounding the property. 2. The property: This section looks at the key issues relating to the house itself and helps the user in their attempt to remove emotion in assessment (for example, avoiding a situation where the house was chosen because of the appeal of the kitchen or bathroom). 3. Extraordinary items (only for investors): This section considers rental yield/return and tax benefits from depreciation and building writeoff, for those who are investors. 3


Thinking of purchasing property? Using the guide You will notice that there are small boxes next to each question with numbers next to each box on the right hand side. The numbers are the points allocated to each box. After completing the guide on each property, they can be added up to give a cumulative score. The boxes are the area in which to place the letters (i.e. A B C D, etc.) from the back page of the guide pertaining to the properties being assessed. If you find you are running out of room, put letters close around the box to show they relate to that box. Use multiple guides to avoid confusion in this way. Each question is either “Multiple Choice” or “Yes or No”. If it is “Multiple Choice”, you must choose one of the boxes. If it is “Yes or No”, you will agree with the question and put a letter in the associated box, or, you will not agree, and place a letter in the box provided. (The “letter” relates to the alphabetical letter corresponding to each property listed on the back page of the guide). 4

LTG Goldrock Financial Services Residential Property Investment Guide

Strategy for using the guide If you are serious about viewing a number of properties, take plenty of guides in order to ensure that you do not use any one guide for more than 3 properties. This will make it easier to keep organised and enable you to keep track of everything without getting confused. You will notice that the guide is designed in such a way that it allows you to be systematic in your approach. We would suggest you consider the following strategy to get the most benefit from your guide. n Get in the car with the agent to see the first property. Ensure you have the support materials with you. On the way to the first property, ask our agent all of the questions relating to the first section “The Surrounding Area”. If you are meeting our agent at the property, ask them the questions pertaining to the surrounding area before entering the dwelling. n Next, go into the property and do your assessment on the second question, “The Property.” n On the way out, if you are an investor, ask our agent or the owner questions relating to the last section, “Extraordinary Issues”. n Get in the car, and do it all over again in the same systematic process. n If you feel you are not following the same systematic procedure due to fatigue or concentration lapse, stop and come back later, or another day, otherwise your assessment may be flawed.


RESIDENTIAL INVESTMENT GUIDE

IMMEDIATE ENVIRONMENT EDUCATION (Multiple Choice)

Distance to the amenities VERY CLOSE

Day Care Centre Pre-School Primary School Secondary / senior Tertiary PUBLIC TRANSPORT (Multiple Choice)

FAIR DISTANCE

CLOSE

REASONABLY CLOSE

25 20 15 7

FAIR DISTANCE

5 2 2 0

1 1 1 0

CLOSE

REASONABLY CLOSE

FAIR DISTANCE

20 15 10 7 15 10 7 5 10 7 3 2 5 4 2 0 5 4 2 0

VIEWS (Multiple Choice)

REASONABLY CLOSE

Distance to the amenities VERY CLOSE

Major Hospital Private Hospital Medical Clinics Doctor’s Surgery Chemist

CLOSE

50 25 15 10

MEDICAL OPTIONS (All Multiple Choice)

1 1 1 1 1

Distance to the amenities VERY CLOSE

Major Complex (100 stores+) Medium Complex (50 stores+) Local Centre (15 stores+) Convenience Stores

FAIR DISTANCE

20 15 5 2 20 15 5 2 25 20 10 7

SHOPPING CENTRES (Multiple Choice)

REASONABLY CLOSE

Distance to the amenities VERY CLOSE

Train/Rail Bus Service Train/Rail with adjoining bus service

CLOSE

25 15 7 25 15 5 25 15 5 25 15 5 25 15 5

Distance viewed (more than) 1km 3km 5km 7km

Scenic (Landscape) Residential/City Water

100 75 50 25 150 100 75 50 250 175 150 100

DISTANCE FROM CBD (Multiple Choice) 0 – 3km 4 – 6km 7 – 10km 10km +

250 200 150 125

5


DISTANCE FROM WATER (Multiple Choice) 500 metres 200 1km 100 5km 75 10km 50 POSITION OF THE BLOCK (Multiple Choice)

RESIDENTIAL INVESTMENT GUIDE

Note: If noise from this road can be heard, it may affect re-sale.

Rarely used, quiet street Good street – reasonable traffic Good street – frequent traffic Average street – minor traffic

50 35 15 5

NOISE LEVEL (Multiple Choice) No noise outside the natural surrounding 20 Occasional vehicle/bus 10 Systematic sounds (vehicle/train/etc.) 10 MAJOR PUBLIC AMENITIES (Within 2 kms) (Yes or No) Pool 2 Parkland 5 Library 3 Restaurants/Cafés 5 FACILITIES (Multiple Choice)

Distance to facilities

VERY CLOSE

FAIR DISTANCE

15 10 5 15 10 5 10 5 3 10 5 3

IS THIS PROPERTY (Multiple Choice) The best in the street Above average (in relation to the street) A below average property (which has potential) An average property

75 50 20 10

SIZE OF THE BLOCK (Multiple Choice)

2 2 2 2

Sizes in square metres

350 sqm

Within 7km of GPO Outside 7km of GPO

LTG Goldrock Financial Services Residential Property Investment Guide

REASONABLY CLOSE

Petrol Station 7 Eleven or equivalent Ambulance Police

6

CLOSE

25 5

400 sqm

75 10

450 sqm

100 15

500 sqm

125 25

600 sqm

200 50

700 sqm

225 75

800+ sqm

250 100


IS THE PROPERTY (Yes or No) Very secure 15 Tri-lock front door lock 15 Easily accessible 10 Sloping with views 75 A level block 10 Fitted with security screen doors 25 Fitted with security screen windows 25

RESIDENTIAL INVESTMENT GUIDE

LANDSCAPING (Multiple Choice) Exceptional quality/auto sprinkler system Good design/easy to maintain Bad design/hard to maintain

50 25 5

BUILDING MATERIAL (Multiple Choice) Fully rendered home 100 Face brick/rendered 75 Face brick 50 Weatherboard/chamferboard 25 Masonite/hardi-plank 15 Aluminium siding 10 Foam mouldings/windows and doors -100 ROOFING (Multiple Choice) Galvanised 10 Concrete tile 40 Colourbond 40 Overhangs/Eaves 40 FENCING (Yes or No)

Fully Fenced

Brick Timber Steel/Wire

Back Only

Back & Sides

25 10 15 8 1 4 1 1 2

FLOORING (Multiple Choice) Vinyl/Tile 5 Carpet/Vinyl 10 Carpet/Timber 25 Carpet/Tile 50 Timber 50

7


RESIDENTIAL INVESTMENT GUIDE

KITCHEN (Yes or No) Breakfast bar 5 Smoke detector 5 Rangehood 5 Microwave space 5 Access to verandah 5 Adequate benchspace 5 Garbage disposal 10 Built-in wall oven 10 Built-in dishwasher 15 Large pantry 15 Modern/renovated 50 KITCHEN APPLIANCE WARRANTIES (Multiple Choice) 1 year 2 year 3 year

10 50 100

BATHROOM (Yes or No) Shower over bath 5 Modern 5 Exhaust fan 5 Stand-alone shower 50 Two-way bathroom 10 Separate bath 15 Toilet separate from bath 50

8

LTG Goldrock Financial Services Residential Property Investment Guide

ELECTRICAL FITTINGS (Multiple Choice) Below average quality Average quality Above average quality Ceiling fans to all rooms

2 7 15 20

BUILT-IN WARDROBES (Yes or No) Main room Two rooms Three rooms Four rooms Walk-in wardrobe in main room Ensuite off main bedroom

10 20 30 75 40 40


RESIDENTIAL INVESTMENT GUIDE

GARAGE (Yes or No) Work bench Side door entrance Direct access to house Carport (not lock-up) Single (lock-up) Double (lock-up) Panel lift door Storage area

5 5 10 10 20 50 20 30

DRIVEWAY (Multiple Choice) Concrete 5 Aggregate 10 Concrete stamped 15 Paved 25 GENERAL (Yes or No) Uncovered timber pergola Deck under main house roof line Deck with views

10 50 50

EXTRAORDINARY ITEMS DEPRECIATION BUILDING WRITE OFF Construction between 18/7/85 – 15/9/87 Construction between 16/9/87 – current Construction prior to 18/7/85 but partially renovated Paved construction prior to 18/7/85 but fully renovated

50 150 30 50

YIELD To find the yield, multiply the potential weekly rent by 90%. Multiply this by 5000, and then divide the purchase price into the figure achieved. Yield Percentage (Go to the closest yield shown above from the answer calculated) 5 6 7 8 9 10

SUMMARY This document is a guide to a person considering the purchase of residential property. The point system used has been created to assist you with the property selection process. It was created to open the mind of the user, to help base his/her purchase on logic and reason and to avoid choice by emotion. 9


Property inspection list Address Postcode Description

List Price No. of Points Rental Return

Rating Outstanding......1200 points

Address Postcode Description

Excellent................ 1000 points Very Good............... 950 points

List Price

Good............................... 850 points

Rental Return

Fair...................................... 600 points

Address

No. of Points

Postcode Description

List Price No. of Points

10

LTG Goldrock Financial Services Residential Property Investment Guide

Rental Return


Choosing and purchasing a property checklist Purchasing a property, whether a Principle Place of Residence or an Investment, is no longer simply a matter of seeing the local agent and signing a contract. It is now more important than ever that buyers: 1. Understand all the issues relating to a purchase, and 2. Understand all options available in regards to those issues. Failure to do so may cost home owners and investors considerably in the short to mid term in regards to missed profit opportunity, reduced lifestyle and restricted wealth expansion capacity. Therefore, it is critical to ensure when purchasing that you treat the acquisition as a “project”. This means handling the purchase in a systematic and organised manner and more importantly, being in control every step of the way.

Funding your purchase (understanding the options) 1. Understand the lending process 2. Understand the valuation process 3. Evaluate and select the correct type of loan – mortgage reduction strategies 4. Consider the loan structuring options 5. Consider the taxation options 6. Be aware of the potential problems 7. Consider the ownership options In the past, the typical loan was a 25 year Principal and Interest reducing Loan. Today, there are hundreds of lending options available in the market, including: 1. Standard Variable Loan 2. Basic Variable Loan 3. Introductory (Honeymoon) Rate Loan 4. Fixed Rate Loan 5. Combination Loan

6. Offset Account Loan 7. No Doc or Low Doc Loans 8. Revolving Line of Credit Loan 9. Property Lines with Global Limits 10. Split Loan Facilities 11


When is the best time to buy? Picking the point at which adjustment begins towards the next upswing is difficult – no one rings a bell to signal when markets reach the bottom. However, there are compelling reasons why many investors are quietly returning to the market and resuming their property acquisitions.

current median Brisbane house price is $449,250, while the median unit price is $377,500, according to RP Data.

The Brisbane market is still bearing the scars from the end of the boost to the first home buyer’s grant last year, a marked fall in interstate and overseas migration, and the summer floods. As a result, the price gap in 2011 has widened between Brisbane and the southern capitals, where property values increased 1.2 per cent in Sydney and 0.3 per cent in Melbourne.

The number of homes for sale across the capital cities is now about 31 per cent higher than at the same time last year. The result is that a smaller number of prospective buyers have a larger pool of homes to choose from. Properties are therefore taking longer to sell and vendors have to adjust their price expectations downwards.

According to RP Data research director Tim Lawless, Brisbane’s property market is experiencing a “significant correction”. “Brisbane’s median house price is now 24 per cent lower than Sydney’s ($515,000) and 14 per cent lower than Melbourne’s ($485,000),” he said. “Pre-global financial crisis, the gap between Brisbane and Sydney dwelling prices was as narrow as 6.4 per cent.” Brisbane’s property values have continued to decline since November 2010 when the median dwelling price fell 0.4 per cent to $435,000. The 12

LTG Goldrock Financial Services Residential Property Investment Guide

However, the improved buying proposition in Brisbane should help support buyer sentiment, which has remained weak since the GFC.

“Until stock levels start to be absorbed there is not likely to be upward price pressures.” REIQ chairman Pamela Bennett said conditions were ripe for investors, which have remained largely hesitant in the market. “In the majority of cases, sellers currently have to be very realistic about what price they can achieve for their property, which is putting Queensland buyers in the box-seat for the first time in many years,” she said.


TOP OF GROWTH CYCLE 1958 – 1960 1965 – 1967 1972 – 1974 1979 – 1981 1986 – 1988 1993 – 1995 2000 – 2003 2006 – 2007

Feb 1958 Feb 1965 Feb 1972 Feb 1979 Feb 1986 Feb 1993 Feb 2001 Feb 2004 Feb 2007

Easier Money Rising Overseas Reserves

July 1959 July 1966 July 1973 July 1980 July 1987 July 1994 July 2003 July 2005 July 2010

Rising Real Estate Values

11

Rising Interest Rates

12

2

9

3 8

1961 – 1963 1968 – 1970 1975 – 1977 1982 – 1984 1989 – 1991 1996 – 1998

Falling Interest Rates Feb 1963 Feb 1970 Feb 1977 Feb 1984 Feb 1991 Feb 1998 Oct 2008 Oct 2011

Falling Commodity Prices

4 7

Rising Share Prices Apr 1963 Apr 1970 Apr 1977 Apr 1984 Apr 1991 Apr 1996 Apr 2002

Falling Share Prices

1

10 Rising Commodity Prices

Oct 1959 Oct 1966 Oct 1973 Oct 1980 Oct 1987 Oct 1994 Oct 2001 Oct 2007

6

5

Falling Real Estate Values

Falling Overseas Reserves Tighter Money

Feb 1961 Feb 1968 Feb 1975 Feb 1982 Feb 1989 Feb 1996 Feb 2004 Feb 2007

RECESSION 13


Seven Deadly Sins of property investment

1

Buying in the wrong location

Not all suburbs grow in value at the same

3

Buying from property marketing groups

These groups have a history of misrepresenting the facts… Never accept a “pre-valuation”, never use a mortgage broker provided by the group, only ever sign REI approved contracts, always insist that commissions and marketing fees are disclosed, be sure to arrange an independent building inspection and bank valuation, beware of rent guarantees and the reason why they are being offered.

rate – some really do outperform others. By selecting the property in the right area you will underwrite your future capital growth performance – so you need to have a thorough, research driven property selection strategy that will capture the trends in market cycles by using processes which have been both mathematically and empirically tested.

2

Buying on emotion instead of logic

14

LTG Goldrock Financial Services Residential Property Investment Guide

Personal taste often dictates the choice of property – wrong! Demand drivers, such as shortage of product, underlying demand, pent-up demand, infrastructure, migration trends, generic population growth, rental yields, qualitative research should determine your product selection.

4

Establish the true market price

Most investors are using borrowed money when they buy a property – if you pay too much you are increasing the burden by actually paying interest on the amount over the market value. An extra $30k borrowed will mean an extra $100k interest is paid over 25 years. An independent valuation is a small price to pay for peace of mind.


5

Incorrectly structuring the ownership

Land produces capital growth

The way in which you structure the ownership of the property will determine just who gets the tax deduction. Capital gains on future sale needs also to be considered. Options include single name for the highest income earner, partnerships, companies, trusts and super funds.

6

Selecting the incorrect finance package

There are probably 20 different ways to structure your loan so you need to be aware of your options. Taxation, exit fees, early repayment options, future redraws etc need to be clearly understood.

7

Houses produce income

Buying the wrong type of product

Land is critical to the future capital growth equation… house & land packages will invariably outperform apartments in both income and gains. Don’t fall for the easy to manage option – units often go down in value in the first 5-7 years.

15


Brisbane Following the 2003 migration peak, Brisbane has assumed a new growth pattern. A major determinant is the impact of overseas migration. Net overseas migration exceeded interstate migration in 2006. Remember that these people are looking for a different type of housing. Demand for land in outer Brisbane will remain strong during the next 5 years – particularly in the western corridor. The Gold Coast can also expect strong demand during the same period. The Sunshine Coast will be driven by demand from the “empty nesters” leaving the southern states.

Why Brisbane? Brisbane is Australia’s third largest city, with a population of over two million people. The area covered by the Brisbane City Council remains the fastest-growing municipality in Australia, with the Gold Coast second. Brisbane City has grown by between 15,000 and 21,000 new permanent residents each year for the past decade. Brisbane has grown at a much faster rate than both Melbourne and Sydney for most of the past decade. Looking ahead, population projections from the Australian Bureau of Statistics indicate that Brisbane’s rate of population growth will continue to outstrip that of both Melbourne and Sydney for the next decade at least. 16

LTG Goldrock Financial Services Residential Property Investment Guide

Almost 226,500 people live within Inner Brisbane; defined as the area within a five kilometre radius of the Brisbane GPO. The population of Inner Brisbane has grown by an average of nearly 5,000 new residents each year for the past decade. n Vacancy rates are also extremely tight across Inner Brisbane, a trend that has accelerated over the past 24 months. n There are currently 41 major infrastructure projects, worth $38.770 billion, underway or committed across Brisbane City. n The majority of this expenditure ($29.442 billion) is located in 18 projects across Inner Brisbane. n Such major infrastructure developments generate considerable employment and increase demand for residential property. n Strong dwelling demand. n According

to the Queensland Government’s South East Queensland Regional Plan an additional 156,000 dwellings will be required to house the increase in Brisbane’s population over the next twenty years.

n Most

will be delivered in existing urban areas.

n 138,000

(88.5%) of these new dwellings are to be “infill” in nature, meaning mainly medium density in existing residential areas, mainly inner- and middle-ring suburbs.


Property hot-spots

Mining towns

n The

Regional towns linked to the mining industry are expected to again be among the top-performing property markets in Australia in 2012. Port Hedland, Newcastle, Bowen, Whyalla and Darwin are among the best prospects for 2012.

n Analysts

Mining towns have great allure for property investors because they often provide high rental returns and rapid capital growth; but mining towns are among the most perilous locations for investors. They sit at the extreme far end of the risk spectrum. Mining towns have volatile markets that depend on buoyancy in the resources sector.

property boom compass was fixed firmly on Brisbane’s inner south-west in the period 2000-2010, but those trying to predict the best capital growth in the next decade need to do little but follow the train line. have unanimously agreed that suburbs boasting a rail station en route to the CBD will see marked growth, signalling a push towards transitorientated development.

n Key

areas set to explode in development are Logan, Forest Lake and Springfield.

n Logan

offers two main sources of transportation – the M1 and rail – into two major employment nodes – Brisbane CBD and Ipswich/Springwood.

n We

expect these areas to be hotbeds of activity during the next decade as they are positioned close to Brisbane and the Gold Coast, offering the beach lifestyle on weekends.

Often the prices and rents in mining towns are sustainable only while a resources boom lasts. There are risks to be heeded – most notably in locations that are dependent solely on the fortunes of a single project + FIFO.

n Price

growth in these areas is expected to average 10 per cent per annum, outstripping Brisbane’s annual average growth of the past decade by 4%. 17


Early mortgage payment strategies

1

In simple terms – make extra payments

On a loan of $300,000 (@7%) an extra payment of $100 per month will save you $68,795 in interest or 4 years and 4 months in payments.

2

Pay fortnightly – pay half your monthly payment each fortnight

On a loan of $300,000 (@ 7%) you will save $102,789 in interest or 6 years and 3 months in payments.

3

Use an offset account

$5,000 in an offset account will save you $32,922 in interest. If you combine this with a fortnightly payment plan you will save $122,738.

18

LTG Goldrock Financial Services Residential Property Investment Guide


Property management Our goal‌ Building and maintaining our long term client relationships Our aim is to deliver an exceptional level of service through a highly professional and experienced team. We are absolutely committed to providing our clients with over and above personalized service. At LTG Goldrock Financial Services we dare to be measured by the results that we produce for our clients. Communicating with our office is only a click away We encourage all of our clients to notify us of their email address as it is a quick and simple way to stay in touch. Email us at: info@ltggoldrockfinancialservices.com Property inspections Clients are invited and encouraged to attend the routine inspections. Online Agent The Online Agent web portal gives you the ability to monitor your residential investment property. Instead of having to get in-touch with your real estate agent during office hours, you can view, search and download the details you need, all from your own home or office computer. Your property manager will provide you with simple instructions on how to access your property details.

Services Provided internationally on www.realestate.com.au n Conduct open homes for prospective tenants n Thorough background checks n All applications are presented to Owner for approval n Preparation of lease agreements, bond lodgments and condition reports n Collection of rental payments / invoices n Conduct regular routine inspections which includes photos n Attend to any maintenance issues promptly n Notification of any breaches or changes to the tenancy agreement n Appraise the current rental market prior to the lease expiring n If legal action is required – presenting the case to the magistrate n Advertise

Here is a snapshot of what you can access through Console Online Agent: Owners: n View investment property details n See information on property inspections and maintenance tasks n Download monthly statements Tenants: n View rental property details, including rent arrears and rent review and lease dates n See dates of property inspections n Submit requests for property maintenance 19


T: 0414 322 900 E: info@ltggoldrockfinancialservices.com W: www.ltggoldrockfinancialservices.com


LTG GoldRock Financial Services Property Investment Guide