Wise Monkey Property

Lifestyle & Result Driven Investment Property Advice

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Archives for property investment

The Value Of Apartment Investing

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Property investing over the last decade has changed dramatically. The common idea that purchasing a property with land being the safest property investment is not as true as it used to be. Today’s markets are vastly different to those of a decade or two ago. The basis of the saying old saying ‘safe as houses’ stems from the fact that house prices depreciate, whilst land values appreciate. This is still true but overlooks booming trends such as apartment investing where there is plenty of value and money to be made.

The Value of Apartments

Although apartments themselves do not have a land value, the ground they are built on can have a massive impact on their value. Prime locations, regardless of property type will always drive value. Sydney is a great example where a one bedroom, one bathroom apartment averages a staggering $1 million! The changing demographics of our society in recent years have sparked a boom in apartment construction. Our society is trading in the traditional backyard for inner city living, chasing better jobs, better lifestyle and better commuting options. Current trends in Sydney and Melbourne markets will be followed by Brisbane and the Sunshine Coast in the near future. The potential to earn $1 million for a one bedroom apartment seems like a good idea to me!

Shift In The Economy

A long standing history of manufacturing, mining and job centres in rural areas has made house and land more attractive in the past. With the mining boom over, the primary industries driving the economy are rapidly changing. The rise in service based professions in online fields such as marketing, IT and education is increasing exponentially. These professions are primarily based in and around CBD’s on Australia’s east coast. These industries are set to become our primary industries in the near future which will translate to wage growth and job opportunity, making cities more attractive to live in. Areas of high economic growth, job availability, lifestyle and amenities will drive disproportionately high property values to their suburban counterparts.

What Properties Will Be In Demand In The Future?

These factors all point to one obvious conclusion. The need for inner city medium to high density apartments is inevitable. The Master Builders Association of Australia has already predicted that our need for new housing as a result of population growth in the next decade will exceed 9 million new houses. Historical market trends in areas like Sydney prove that the high values driven by demand is simply to good to overlook. Regardless of your preference, research and informed decisions on what properties are in demand currently and will continue to be in demand in the future is imperative to your investing success. CBD apartments should definitely be something to contemplate adding to your portfolio.

 

 

The Federal Budget 2017

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The Federal Budget for 2017 was released last week and here is the Wise Monkey Property take on it! A large focus of this budget is the governments housing affordability package. The aim of the package is to combat the increasing housing prices and stimulate investment from both first home buyers and investors. The key areas that you need to know about for your investing journey are first home buyer incentives, infrastructure funding and Capital Gains Tax incentives.

First Home Buyers

First home buyers have been dealt an excellent hand with the First Home Super Saving Scheme. From the 1st of July 2017 you will be able to make contributions of up to $15,000 per year for two years into your superannuation. Which you can then draw on from the 1st of July 2018. With a tax rate of only 15% on contributions and tax at withdrawal of less than 30% offset, it can increase your savings by up to 30% over two years. With options to salary sacrifice and make personal contributions for those who are self-employed, the scheme is available to all prospective first home buyers.

National Housing Infrastructure Facility

This area of the budget will have huge positive impacts on investors. The framework of this scheme will see a contribution of $1 billion over 5 years into local infrastructure such as transport, power, water and site remediation. The establishment and improvement of this infrastructure is going to create new growth hot spots in existing markets. Local governments will have their plans assessed by the government from July 2018 to commence works. Getting into markets as early as possible, before the upgrade will be the key in taking full advantage of the benefits this scheme will provide.

Capital Gains Tax Incentives

Capital Gains Tax (CGT) has had concessions put in place to promote investors to provide affordable housing in markets. The incentives are a 10% CGT on properties deemed ‘affordable housing’. To qualify, houses need to be rented out at below market value rent for a period of three years from July 2018 to qualify for a 60% on CGT when sold. If you wish to rent at any stage above market value, your discount is calculated pro-rata for periods when your investment qualified. A valuable long term strategy that could make you significant returns upon sale. Preparing your investment portfolio now to take full advantage of this incentive.

Negative Gearing

Investors can breath a sigh of relief with the government making no changes to the negative gearing policies. This means that when combined with the CGT discount, there is a lot of opportunity to take full advantage of the new incentives. The only drawback is the removal of the ability to claim travel to inspect your investments.

Setting yourself up to invest

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Many people assume that they have not saved enough, or do not earn enough to consider buying a property. If you have ever thought that investing in property is a goal you wanted to achieve but seems out of reach, we have a simple set of steps that will prepare you for your entry into the market.

Credit ratings

The three elements you need to research before your property journey begins are knowing your credit rating, borrowing capacity and the value of equity or savings you currently have. Credit ratings are used by lenders to determine the risk involved in granting you a loan. Credit ratings are usually affected by late or failed repayments on bills and credit cards. If you have a good credit score, you will be in a good position to secure a loan.

Equity and assets

Before looking into loan options, you will need to assess the value of any assets you have, savings and income. Borrowing is based on risk, the lower the risk, the greater your borrowing capacity. A reliable, steady income will assist in you gaining approval for a loan as it reduces the risk of you potentially defaulting on repayments. Your savings and saving history is a good risk reduction metric for lenders as well and works in a similar way. The value of any assets or equity you have will increase your borrowing capacity because it can act as an ‘insurance’ against you defaulting on your loan.

Loan calculators

There are a number of banks and lenders who provide free mortgage calculators. These calculators are an excellent tool to help you understand what your loan repayments are most likely going to look like. You are even able to see what impact interest rates, length of the loan and different loan options will have. Once you know what size loan you will require and are comfortable with the likely repayments, the next step is reaching out to a lender.

Lending options

Securing a loan pre-approval through a lender will answer any final questions on how much you can borrow and any conditions associated with the loan (deposit requirements, interest options etc). There are a number of options available to you such as banks and building societies. But we recommend you use a mortgage broker to give you a better idea of all the mortgage options available in the market. Once you have attained pre-approval, your next step is making an offer on the investment you have been dreaming of.

Mortgage Reduction Tips

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I regularly meet with new clients who discuss how long their mortgages are taking to pay and wish they could pay it off more quickly. What I have come to realise is that most people do not know of a handful of strategies that could take years off their loan repayments. Most consumers don’t know there are options to decrease the loan costs and length of repayments.

What I have come to realise is that most people do not know of a handful of strategies that could take years off their loan repayments. Most consumers don’t know there are options to decrease the loan costs and length of repayments. Over the next few blogs, I will explain a myriad of mortgage reduction options available to everyday Australians.

Discussing your financial situation with a professional property investing mentor will help you find suitable strategies to employ.

Use weekly or fortnightly repayments 

This is one of the most simple and low-risk tactics out there, while also being surprisingly effective. Most loans offer monthly or fortnightly repayments, and there are 52 weeks in a year or 26 fortnights. By paying fortnightly, you are actually paying 13 monthly repayments rather than 12 calendar months (26 dived by 2). Offering one extra month’s repayment each year, without noticing really! When it comes down to paying down your loan more rapidly, by paying fortnightly you could take 4 years off a 25-year loan. Now that’s an easy strategy, simple but effective.

 

Give your mortgage extra income as you receive it

As you earn more money in your career, allocate the pay-rise toward your mortgage rather than spending it. Something so simple, but easy to forget or not prioritise! The principal amount on which interest is calculated will come down each time you pay more off. Thus you’ll pay less interest overall if you stick with this idea.

 

Keep your repayments the same when you refinance to a lower rate

At various points in the life of your loan, you will be able to refinance. Once you are able to refinance and obtain a lower interest rate with possibly smaller repayments, work to maintain your repayments at the higher rate. You are used to paying this amount so it’s smart to continue rather than minimise repayments as many Australians do.

 

Tax return lump sum payments

Provided there are no fees for paying off lump sums from your mortgage provider this can be a very effective tactic to reduce your mortgage. Each year put your tax return onto your mortgage repayments, the principal amount that your interest is calculated will reduce thus you will be paying in future less overall interest.

 

 

 

 

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READY FOR PREMIER PROPERTY INVESTING HELP?

Whether you are a first time investor, or you already have a diversified property portfolio, you will find the utmost quality of service at Wise Monkey Property. Contact us today to see what goals we can achieve together.

Our contact info

MAIL: Po box 888 Samford, Queensland, 4520

PHONE: 0410 691 311

EMAIL: matt@wisemonkeywealth.com.au

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