Posts Tagged investors

The Renter-Investor

Are you a renter-investor?

 

Mortgage broker Sydney

If you are, you’re one of a savvy group of first homebuyers who have chosen to purchase an investment property instead of their first home.

The rise of the first homebuyer as ‘renter-investor’ shows borrowers are thinking outside the square to get a foothold in the property market without compromising lifestyle.

Not only do people want to live in areas that suit their lifestyles now – near beaches or cafés or in inner city lifestyle suburbs – but they’re also keen to live close to their workplace so the commute to and from work doesn’t eat into their valuable personal time.

With the cost of properties located in these ‘lifestyle areas’ out of reach for many first homebuyers, they’re taking a more creative approach.

Be vigilant and strategic

While all borrowers need to have a clear strategy and structure their lending accordingly, this is of particular importance for first-time rentor – investors

There are a number of considerations that first-time property investors need to think about. For example: What is your strategy? Are you looking to buy and sell an investment property within five years or are you planning to purchase and keep it as an investment offering growth over a long-term period of, say, 10 or 20 years?

Will you then draw equity from it to use as a deposit for a home or another Investment property in the future?

It’s important to do your homework – ask yourself why and where you’re going to buy your investment property, and what the expected capital growth rates and rental returns will be in the areas you’re looking to purchase.

The answers to these questions allow you to run projections of what sort of gains you could expect to make if you sell in the future.

Of course you would also need to consider a range of costs including buying and selling expenses, capital gains, tax implications, and fees for professional advice.

Property investors also need to consider a range of factors that are best discussed with their mortgage advisor first and then with their accountant.

For example, if you purchase an investment property with a view to selling it within, say five years, you will have to pay capital gains tax.

Conversely, if you’re going to hold the property for a longer period of time and draw on the equity to fund a home or additional investment properties, then you won’t need to pay selling costs and capital gains tax and, as such, your mortgage broker can help you to structure your lending to suit.

There are also a range of options available to minimise cash flow shortfalls when owning an investment property, such as making interest only payments, maintaining depreciation schedules, conducting regular rent reviews, and having tax adjustments paid back to you monthly.

 Borrowers should discuss this with their mortgage broker and accountant so they can structure their lending and finances to their advantage.

Renter-investor approach not just for first homebuyers

Our living circumstances can change for a host of reasons: You may have received a job offer that requires you to move to an inner city location or you may just want to live in a suburb that offers the lifestyle you and your family desire, now. As a result you may decide to rent out your home and make it an investment property.

Likewise, you may live in an area that is currently achieving good capital growth and yielding excellent rental returns for homes like yours, so you decide to rent a smaller property elsewhere in order to rent out your existing home.

There is a range of reasons for choosing to rent while putting your owner-occupier property on the rental market.

Regardless of your circumstances, seek the advice of a quality mortgage broker to help you structure your lending and get the most out of your investment strategy .

I hope you have found this information useful and if you have any questions please contact me Kim Wight Mortgage Broker Sydney at kwight@smartline.com.au.

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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PROPERTY VALUES AND RENTAL INCOME

One of the most important measures of a property’s value is the amount of rental income that it can generate.

A good way to determine if a particular property is generating strong rental income is by looking at the rental yield.

 Here is an example of a rental yield calculation (based on the December 2013 RP Data Property update) below:

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a) The median rent for a unit in Brisbane is currently $409 per week. This equates to $21,268 over a year.

b) The value of this property is $386,690.

c) $21,268 in annual rent is 5.50% of the $386,690 property value. 5.50% p.a. is the Rental Yield.

What makes this current market so enticing for investors is that rental income is often higher than the interest cost of the mortgage.

 Take the above example in Brisbane.

a) A person takes out a home loan for $367,355 to purchase a unit for $386,690 (the home loan is 95% of the unit’s purchase price).

b) The annual interest only payment on this loan with a 3 year fixed rate of 4.89% p.a. is $17,963.

c) The current annual rental income for this property would be $21,268. You do the math.

There are of course other risks, costs and benefits associated with owning an investment property, however, this situation where mortgage interest expense is less than rental income is quite rare.

Now you can see why people are so keen to invest. If an investment property has little impact on your weekly budget then it can be an attractive proposition.

If you would like to conduct a more thorough review of your investment options contact me Kim Wight Mortgae Broker  Sydney  on 02 9594 5722 or email me at kwight@smartline.com.au

 Note: Don’t forget your Superannuation savings. If it makes sense for you to set up a self managed superannuation fund then buying an investment property could be well within your reach.

 

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Tax Deductions Available to Property Investors

Of all the tax deductions available to property investors, depreciation is most often missed.

Research shows that 80% of property investors are failing to take advantage of property depreciation.

Claiming depreciation on an investment property can make a big difference to an investor’s cash flow because it is often a “non cash” expense.

What impact does the correct tax deductions have?

This investor example below demonstrates how simply claiming depreciation turned a -$79 per week cash flow drain into $3 per week surplus.

Property Investors

Property Investors

The above example was provided to Smartline by “BMT Tax Depreciation” (Quantity Surveyors). A QS firm can prepare a tax depreciation schedule that you can use in your tax return.

If you would like to discuss this or have any home loan questions please contact me Kim Wight Mortgage Broker Sydney at kwight@smartline.com.au.

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