Archive for the ‘Property Development’ Category

For Adelaide to become a more vibrant and sustainable city, we need to stop the urban sprawl.

Did you know that Adelaide covers the same area as London? The major difference being that London has a population of 7 Million whilst Adelaide has a population of just 1 Million.

So what does this mean for our kids…

Gone are the days that we condemn our kids to migrating to the outer suburbs, to find the cheapest block of land, or house & land package that they can afford to purchase as a first homeowner.  And in the process condemn them to owning two vehicles to commute to work and raise a family to commute to school and leasure.

At last we have a sustainable plan for Adelaide, which provides us with a direction on population and how our city will grow.

Watch this Youtube Video about Adelaide’s 30 Year Plan…

So how does the 30 Year Greater Adelaide Plan change the future for our kids… 

The first step is what is happening now with our $2 Billion Public Transport Infrastructure Upgrade.

This investment is all about improving our public transport with modern new electrified passenger trains, trams and modern buses which integrate into our train and tram network. The next step once our public transport network is upgraded, is to encourage urban consolidation along our major public transport corridors, which means we will lessen our reliance on vehicles as our sole form of transport.

How will the 30 Year Greater Adelaide Plan encourage urban consolidation?

The 30 Year Greater Adelaide Plan, announce the intention of our Government to encourage higher density housing along our major publice transport routes by relaxing Council Planning policies 800 metres either side of major public transport routes.

So if I was a Property Investor… where should I purchase property for future growth?

Obviosly 800 metres either side of the major established train and tram lines!

This story was brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Specialists.

While some may still be pining for those good old boom days, others have come to terms with the fact that a fairly flat property market lies ahead, for a while at least. So do you rest on your laurels and await the next value rebound, relying on the nature of cyclical trends and the fact that they will predictably take us back to more lucrative, asset appreciating times?

Astute investors are starting a new trend for the new times and, as Gary Pemmelaar, Civil Engineer, Licensed Builder, Developer and Proprietor of Raine & Horne Glenelg succinctly puts it; “It’s all about value adding now.”

Gary Pemmelaar contends that this run-of-the-mill investment method has had its day and the future of wealth creation lies in expansion and development. “With greater interest and media focus on real estate, recent years have seen an increase in demand to get into the market. This demand has had some positive influence on the market place, which has now flattened out in many regions. Rather than purchasing more to increase a property portfolio, the average investor might well look into their existing real estate to see if there may be opportunities to subdivide.”

All around the country, State Governments have been developing blueprints for future urban direction within their capital cities, suburbs and country towns. These are based on population projections which not only show general growth within the country over time, but also a vast increase in aged and single person household demographic clusters.

Gary predicts this is going to be an increasingly obvious trend and hence feels property development is, “a topical thing to be looking at, in the sense that you would expect subdivisions are going to become more prevalent in the future and it’s an aspect of housing that’s going to increase over time.”

Gary says; “The two primary reasons for that are what’s going on with growth boundaries in cities and density requirements for housing. Adelaide is a good example of that, where you have had significant urban sprawl and now with rising fuel costs, many people are now looking to move back into the inner and middle suburbs, which in turn will channel more people down the route of subdividing in terms of property investment.”

Secondly, Pemmelaar says, “We’re probably going to see this as a more viable investment option, simply because there’s been a massive increase in the price of land in recent times. This has been particularly occurring on the fringes of capital cities. This trend could direct people’s thinking more towards subdivision of an existing part of a portfolio they already own, rather than looking to develop a new block.”

He also points out that currently, “Housing markets are pretty tight and rental markets are quite firm. Hence, you have a situation where underlying demand for housing is strong, but you’re facing certain constraints such as land supply and the inflated price of land.

 ”People looking to invest in property are going to see an incentive there to supply the market, but within constraints that might promote more subdividing than we’ve seen in previous cycles.”

What is subdivision?

Subdivision necessitates active involvement from the investor, unlike passive ventures where you purchase a property and rely on long-term capital gains. It’s an endeavor that requires hard work and should not be entered into lightly. Subdivision can involve purchasing a raw parcel of land to create a small to large housing estate or building on an existing property with a second dwelling, such as duplex or dual occupancy sites.

It can also encompass purchasing an existing block of units to separate or strata the title, so that instead of one product, you have the bonus of selling single units within the complex. Subdivision may involve creating an entire new block of townhouses or units for the medium-density market on an acreage allotment in an area where a council encourages this activity.

Mr Pemmelaar of Raine & Horne Glenelg describes a recent deal he was involved in to illustrate how rewarding and simple subdivision can be;  ”On behalf of a Client  we found and purchased a 1950’s house on an 800m2 block, obtained planning approval to subdivide, project managed the subdivision, design and construction of a two semi detached dwelling”.

“They haven’t had to do any of the development work; it’s all been done for them by us. By using our project development and project management services they’ve had the advantage to buy wholesale in terms of purchasing the land and building the new dwellings at cost and then selling retail, by selling them off at completion.”

Gary walks us through the scenario whereby other Clients are currently using Raine & Horne Glenelg to manage their subdivision.

“Another example is where we are currently developing a five townhouse development on the southern beaches for a group of Clients; in this case we identified the site and carried out feasibility for development potential for our Clients. On their behalf we then purchased the site and then project managed the planning approval and subdivision, the design of the townhouse development and we are currently gearing up to call tenders from builders for the construction of the development.”

Gary added “The fantastic thing about this development is that the investors will sell down three of the townhouses to minimize their borrowings, and retain two remaining townhouses at a wholesale price that when rented will create rental cashflow from day one.”  

Many experts believe that you can combine subdivision and being an active participant in literally building your property portfolio, with passive investment. So where do you start with this approach to wealth creation?

Gary suggests, “The most viable subdivision for the average investor to start with would be a small one. The smaller the subdivision, generally the less risk. A house on a large block suitable for two dwellings may be the ideal first time subdivision.

“Consideration then has to be given as to whether you’re building a second dwelling to keep the property long term or to sell it off and place the money back into debt reduction of an existing mortgage.” Setting up a scenario whereby developing a property can create positive cash flow that will assist in reducing debt on any existing loans and even purchasing further property to retain in your portfolio, is highly recommended by those who know best.

Should you want to know more about property development as a vehicle to building a positive cashflow portfolio, call Gary Pemmelaar of Raine & Horne Glenelg

The Latest Property Trend …Transport Orientated Developments

It’s a term making its way into the South Australian vernacular and unprecedented investment in the State’s transport infrastructure look certain to cement its place.

Transport Orientated Development – or the abbreviated version – TOD.

So what are they? In simple terms a TOD is a purpose built neighbourhood with public transport as its centrepiece. They are a blend of high density residential developments, schools, cafes and a rang of retail and commercial operations serviced by one or more integrated modes of public transport.

Since Roman times communities have been built along trade routes, while the modern day transit orientated development is generally accepted to have risen to have arisen from the ashes of European capitals left in ruins after World War II.

In their reincarnation, Adelaide trams brought inner city suburbs like Norwood and Unley to life. But a love affair with the car and bus has driven urban sprawl and the earliest TODs are now the regular suburbs we know today.

The renewed interest in public transport – especially the second coming of Adelaide’s tram network – and the improved services to be delivered will drive a new wave of development. It will be centred around our major corridors – namely the six metropolitan railway lines (Belair line, Tonsley line, Noarlunga line, Gawler line, Outer Harbor and Grange lines), The Coast to Coast tramline and the O’Bahn busway.

Several sites along these Adelaide transport corridors have potential as TOD’s and indeed a number have already been identified. They include Castle Plaza, Noarlunga, Mawson Lakes, Playford North, Brompton, Glanville, Port Adelaide, and Woodville/Cheltenham.

In time they will be assessed for their suitability for high or medium density housing development complemented by improved public transport. The environmental benefits are there for all to see.

 Transport Orientated Development may not yet roll off the tongue, but we should not be worried if delivering our transport future now goes a little off track.

 This article was adapted and taken from “New Connections’ Publication Issue 4 Winter 2009.

This article is brought to you by Raine & Horne Glenelg – your Glenelg Real Estate Agent and Property Mangement Expert.

A: An expertly completed renovation can add considerable value to your home. Yet with restrictions such as time and money, deciding where to start is a common issue for homeowners.

In terms of resale value – as well as everyday use – the kitchen and bathroom are generally considered the most important rooms. In fact, a recent Housing Industry Association (HIA) Kitchens and Bathrooms Report said the majority of consumers sought practicality and elegance from kitchen and bathroom renovations. 

However, the kitchen is generally regard­ed the home’s focal point and is therefore usually the best place to start. But be warned, a major kitchen refurbishment could be costly and complex, given it generally involves plumbing, cabinetry, design and electrical components. If cash is tight, then a coat of paint, some new lighting or bench tops can kick-start a relatively inexpensive kitchen overhaul. 

Bathroom renovations can range from respraying the enamel on the tiles, to a re-tile (expect to pay a few thousand dollars), to eliminating mould, adding a new shower screen or switching the elderly bathtub for a sprightly spa. 

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

Return to Raine & Horne Glenelg Website

The latest demographic forecast now suggests that South Australia’s population will reach 2 million people by 2027.

Professor Hugo, Federation Fellow Professor of Geography of The University of Adelaide and Director of the National Centre for Social Applications of GIS, told investors at a Raine & Horne Property Investor Information seminar; South Australia’s housing will be under severe pressure as our population approaches 2 million with increased mining and defence job growth.

Professor Hugo stressed that our household growth will continue to outpace population growth because of our demographic trend towards lower numbers of persons living per households – single parent families, empty nesters, single, professional couples, etc. He predicted that if South Australia’s population target of 2 million people is to be achieved – South Australia will require 300,000 new dwellings, of which 240,000 new dwellings will be required in Adelaide.

Indeed with the urbanization of China and India being the single biggest driver in the world economy today, South Australia’s mines will play a major part in providing resources for those growing economies. According to the latest Australian Bureau of Statistics ABS figures, 55% of Australia’s mining exploration activity is occurring in SA. Indeed SA is entering a multi-billion dollar mining boom and is now rated No 4 out of 68 international mining jurisdictions in the world.

Notable new mining expansions are situated at Prominent Hill, Challenger Mine and Roxby Downs in the far north of South Australia. These mines are emerging as major mines in the world, particularly Roxby Downs which will be the largest mine development ever, with 35 percent of the world’s known uranium deposit, which with the demand from China will require 300,000 new people to be attracted into mining.

A report by McKinsey Global Institute predicts China’s urban population will grow from 572 million in 2005 to 926 million by 2025 and one billion by 2030.” By 2025, China will have 219 cities with more than one million inhabitants – compared 35 in Europe today – and 24 more cities with more than five million people. With up to 50,000 skycrapers to be built – the equivalent of 10 New York cities – and 170 mass transit systems, China is going to need a lot of iron ore, copper and other natural resources that are buried underground in South Australia.

Grand Private Equities Stockbroker Wesley Legrand agrees; “It has been our long-held view that the urbanization of China is the most important event to happen in the world economy since the industrial revolution of the 18^th and 19^th centuries” he said. “This is not a short-term cyclical event. The current urbanization of the Chinese economy, followed by India, represents the initial phase of a new economic order which will re-shape the global economy forever”.

Mr Legrand went on to say that the old fashioned adage “when the U.S. sneezes the rest of the world catches a cold” appeared to be no longer relevant. “Despite the worst housing market in the U.S. since the Great Depression of 1929 and a significant U.S. economic slowdown, Chinese economic growth fell be less than 1 per cent to 10.6 per cent in 2008 from 11.4 in 2007”. “We have maintained that Chinese urbanization is driving a permanent structural increase in energy and base metal demand, and fortunately for Australia we are very rich in both.”

What does all of this mean for Adelaide’s population and housing needs?

It means that Adelaide and it’s housing needs will be transformed over the next twenty years with significant exciting urban revitalizations in property to house Adelaide’s emerging job growth and population migration to SA.

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

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 Angus Raine, CEO of Raine & Horne, says almost 50% of landlords will miss out on potentially thousands of dollars by failing to claim depreciation on their investment properties before June 30.

He notes, “Many property investors either don’t maintain an accurate depreciation schedule or have a schedule that is out-of-date.” A depreciation schedule shows depreciable assets such as carpets, blinds, curtains, air-conditioning, fire alarms systems, light fittings and hot water units.

Angus explains, “Landlords can claim up to 12% on depreciable assets and also in many cases 2.5% of the building cost (not the value) of residential properties built on or after 18 July 1985. Depreciation can also be claimed on the cost of improvements made after 26 February 1992 to older properties.”

It’s worth remembering that the cost of a depreciation schedule is also tax deductible. Landlords can expect to pay between $650 and $700 for a depreciation schedule. But get a schedule before June 30 and it can be used to minimise your tax this financial year.

Peter Bembrick, a tax partner with accounting firm HLB Mann Judd Sydney says many landlords are also failing to maximise their full depreciation entitlements. “Often investors depreciate expenses such as carpets, light fittings and blinds, but fail to depreciate property owned by the body corporate that they have a part share in.”

Pre-June 30 tax tips for landlords

1.       Claim all deductions and depreciation prior to June 30.

2.       If you don’t have a depreciation schedule, consider getting one – they are tax deductible and can trim thousands of dollars from your 2008/09 tax bill.

3.       Prepay up to 12 months interest in advance on an investment property mortgage and claim a tax deduction for 2008/09.

4.       Where possible, time a property sale for after June 30 to avoid triggering a capital gains tax liability this financial year as personal tax rates will fall from 1 July 2009.

 

 

 

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

 

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The Australian Taxation Office (ATO) differentiates between repairs and improvements. To ensure the best results are obtained from an investment property, it is important that you understand the difference between the two claim options.

Deductible Repair: Returning items or property to their original state; an exercise in retaining the value of the item or property. Repairs attract an immediate 100% deduction in the year of expense.

Improvement: Improving the condition of an item or property beyond that of when it was purchased. Improvements are capital in nature and as such, must be depreciated over time.

When determining whether a repair or improvement has been made, often three basic tests are employed. They are:

1. Has the condition of the property been improved beyond the original condition at the time of purchase? When an item was partially or fully replaced, it needs to be determined whether it was done due to the item being damaged, or done to improve what was previously there.

2. Has the property been established as an income producing property? The ATO states that repairs must relate directly to the wear and tear or other damage that occurred as a result of renting out the property.

3. Was the asset partially replaced, or replaced in its entirety? Partially replacing an item, like a fence panel, due to damage or wear and tear, often implies that a repair is being carried out. However, if a fence panel needs to he replaced, but the property owner decides to replace the entire fence (for no apparent reason except to improve the property’s value), this will he classified as an improvement.

Important Points

When completing repairs, they should be carried out when the property is tenanted. The ATO will allow repairs as a deduction only if the property is being used for income producing purposes at that time. However, if tenants have recently moved out and repairs need to be made due to damage caused by those tenants, the repairs will also be allowed as a deduction as the damage occurred when the property was income producing. It is also important to consult your accountant when making a repair claim, as it becomes a 100% immediate deduction.

It is important to note that an initial improvement at the time of purchase will not give rise to an immediate tax deduction. Property investors may be able to claim the cost of an initial improvement under the special construction write-off provision, or create a plant or article which may be depreciated over time, but it wilt not create an immediate deduction in its own right.

At Raine & Horne we facilitate a range of professional services to unlock cash flow for our Landlords. If you are a Landlord, it is important that you get professional advice before you make any improvements to your investment property.

Call Raine & Horne Glenelg today on 8376 8844 to find out how we can help you maximize your depreciation deductions from an investment property.

This article was brought to you by BMT Quantity Surveyors in association with Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

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Overall, Australians are now collectively spending millions of dollars every week on home renovations.

 

Raine & Horne Glenelg has produced this article to outlines some of the key issues to consider before you renovate your home. This report is based on the large wealth of experience that Raine & Horne has amassed through dealings with owners who have decided to buy a home for renovation purposes or sold a recently renovated property.

 

Common Mistakes Made By Home Renovators.

 

Mistake #1 – Getting Emotionally Involved

Many homeowners undertake a home renovation for emotional reasons. Very often they fall ‘in love’ with the property. This emotional issue applies to both home owners and investors. One of the biggest mistakes homeowners make when undertaking a home renovation is to overcapitalise their property.

 

Mistake #2 – Failing to Understand the Meaning of Overcapitalisation

According to the Royal Australian Institute of Architects; many homeowners are paying thousands of dollars only to devalue their homes. One of the ways they do this is by overcapitalising which means to improve a property beyond its resale value. Overcapitalisation means you spend too much money on the property and are not be able to recoup these monies if you decide to sell it. A simple example would be if a homeowner spends $150,000 on home renovations and then decides to sell the property. The homeowner may find that the value of the property has only increased by $75,000 meaning that they have effectively lost $75,000 through the renovations. In effect, they have over-capitalised the property by $75,000.

 

Mistake #3 – Not Doing Your Homework on Comparable Market Pricing

Unfortunately, it is important to recognise that most suburbs have a median sale price and an upper sale threshold specific to your suburb. Even different streets in your suburb have different price thresholds; that’s because your neighbour’s houses and the general streetscape have considerable influence on the value of homes in your street. Before renovating it is important to consider the housing styles, demographics of your suburb, and sale prices achieved of other homes in the area that have recently sold.

  
Mistake #4 – Under-Estimating all of the Costs Involved in Building

This is one of the biggest mistakes that homeowners make when renovating their homes. Homeowners typically under-estimate the costs involved in building. Such as; demolition costs, professional fees, contingencies for variations, foundation changes due to soil conditions, fit-out and landscaping, kitchens and bathrooms, escalation of building costs and delay and acceleration costs to finish the project on time.

 

Mistake #5 – Poor Selection of a Builder

Property owners who decide to employ a builder to undertake home extensions also encounter problems because they have not undertaken sufficient research on the experience of the builder, and their past record in undertaking renovations. Especially their “variation claims” history, often Builders locks unsuspecting homeowners into building contracts which cost homeowners thousands in variation costs. Another common mistake is to let the Builder provide the design, and therefore restrict the homeowner from getting competitive quotations upon the Builders design.

 

Mistake #6 – Doing it DIY to Save Money

Some people also make the mistake of trying to undertake home renovations themselves. This can prove costly in time and is financially unwise because a poor standard of work will only devalue the property. Character homes, in particular, require a higher standard of renovation work and you may need to carefully select tradesmen with past experience in this area to ensure that the work is properly completed. If you decide on a major renovation don’t cut corners doing it yourself. There is no such thing as a cheap renovation. Ultimately, it will impact on the resale value of the property or you will spend more funds at a later date to fix the original faulty work. Always seek competent, professional advice and trades people before undertaking a major renovation.

 

 

Mistake #7 – Failing to Stick to a Budget

A common problem is that home renovators do not operate with a strict budget and are unable to complete planned renovations because of a lack of money. This mistake results in homeowners financially overextending themselves through a lack of financial planning. The “Catch 22” is that renovators often can’t then sell their ‘half completed’ renovation and end up in severe financial hardship.

 

Mistake #8 – Poor Functional Design Layout and Design

A very common problem is that home renovators end up spending too much on a poor functional layout because of the limitations of the existing building. In many cases the homeowner would have been better off, to have demolished the existing house and start all over again. Another common problem is where the style of the renovation is inconsistent with the rest of the house; you’ll often see houses for sale with a modern extension that clash with the rest of the house which is still stuck in the 1970’s. These properties are “lemons” on the market and typically homeowners lose money on these renovations.

 

Mistake #9 – Spending Money on the Wrong Things

If you are living in $100,000 house you will not get a good return on an investment in a $35,000 bathroom. Swimming pools are a good example of additions to a property that often doesn’t add value. Many buyers do not want the work, expense, and potential for accidents that come with a pool. The general rule is that you should not spend more than 25 per cent of the value of your home on home improvement renovations.

 

Mistake #10 – Underestimating the Disruption to Your Lifestyle

Undergoing a major renovation and living through it, is often overlooked by most homeowners. The disruption to your lifestyle, the mess, the noise and restrictions is something that should not be discounted. If you are having major renovation (especially if you are a family with young children) consider moving out and renting elsewhere during the construction phase.

 

Before you make the decision to renovate or buy a new house, carefully ask yourself the following questions.

 

1. Decide what it is you are looking for in a final result and ask yourself if it will be cheaper to buy a different home or to renovate your old one.

 

2. What is the average selling price of homes in your area?

 

3. Will renovations alter the appearance of your home so that it appears out of place in the neighbourhood? Check the styles of other homes in the area. Keep in mind it might be a better idea to match or keep in step with the styles of other homes in the area. A poor design could devalue your home by thousands of dollars.

 

4. How much will renovations cost compared to what you paid for your home. What is the expected increase in value as a result of the renovations? Will the renovations actually cause your home to lose value?

 

The decision to buy a new home or to renovate is not one to be taken lightly. It is recommended that you think through every aspect of the project prior to getting started. Seek the advice of a local professional architect/building designer as well as a real estate professional if necessary to determine how the proposed renovations will affect the value of your home.

This article was written by Gary Pemmelaar. Gary is a Co-Principal of Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Property Management Experts – We’ll look after You.

Gary is a Civil Engineer, and hold a Builders Licence in SA. He has considerable experience in both Property Develoment and Renovations. To read more see Gary in a recent article The Adelaide Advertiser run abou Gary.

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Your Question answered by Monika Bonet – Principal Raine & Horne Glenelg.

 A: An expertly completed renovation can add considerable value to your home. Yet with restrictions such as time and money, deciding where to start is a common issue for homeowners. In terms of resale value – as well as everyday use – the kitchen and bathroom are generally considered the most important rooms.

 In fact, a recent Housing Industry Association (HIA) Kitchens and Bathrooms Report said the majority of consumers sought practicality and elegance from kitchen and bathroom renovations.

However, the kitchen is generally regard­ed the home’s focal point and is therefore usually the best place to start. But be warned, a major kitchen refurbishment could be costly and complex, given it generally involves plumbing, cabinetry, design and electrical components. If cash is tight, then a coat of paint, some new lighting or bench tops can kick-start a relatively inexpensive kitchen overhaul.

Bathroom renovations can range from re-spraying the enamel on the tiles, to a re-tile (expect to pay a few thousand dollars), to eliminating mould, adding a new shower screen or switching the elderly bathtub for a sprightly spa.

This Article is brought to you by Raine & Horne Glenelg – Your Raine & Horne Glenelg Real Estate Agents and Property Management Experts –We’ll look after You.

Return to Raine & Horne Glenelg Website