Archive for the ‘Property Investment’ Category

Should I increase the rent?

A contented, long-term tenant is the goal of most property investors, but it can be difficult to measure when it is acceptable to raise the rent, and by how much.

A good guide is to speak to your Glenelg Raine & Horne Poperty Manager about the current average rent for similar properties in the area. If you are considering a rent increase, it should be in line with comparable rents in the suburb or town. This guarantees your tenant they are paying fair market value. Also, any increases you do make should be gradual, rather than a one-off spike which your tenant/s could find hard to swallow.

On the flipside, it is important to keep your own goals in mind, such as capital growth and a steady rental return. The rent you receive will ultimately help you pay off your investment, and the rental return will also be a key factor in determining the future sale price of your property, if and when you decide to sell.

What are the risks of buying an investment property off the plan?

Buying an investment property ‘off the plan’ involves agreeing to purchase a home before it is constructed, often with only a blueprint or computer generated images for reference. But without the finished product to inspect, this approach to real estate investing can carry some risks.

Firstly, study the contract closely and seek legal advice. Your solicitor can advise you on issues such as withdrawing from the contract, or the possibility of changing items such as appliances or kitchen and bathroom finishes.

Also, consider closely the development’s location. Market research from the likes of the Australian Bureau of Statistics (abs.gov.au) and real estate research providers such as RpData (rpdata.com.au) into a suburb’s population growth, infrastructure investment and job prospects will provide a good indicator of your capital growth potential.

Finally, check the reputation of the builder or developer – the internet is the best place to start this search.

Do I need a building inspection, and if so, when?

If you’re serious about buying a home, a building inspection will give you an expert opinion (usually from a qualified builder or surveyor) on the condition of the property you’re interested in. Specifically, the report should provide information about the property’s condition and any significant building defects or problems. In addition, many people choose to have a pest inspection to identify any termite activity or other creepy crawlies that may exist in the property.

If you are unsure of when to conduct a property inspection, be aware that if the house is going to auction, you must complete your building inspection prior to sale. This means you will have no recourse if you find faults in the home after you have won the auction.  

For a private treaty sale, you may have your offer successfully accepted before conducting an inspection. However, the purchase will be contingent on the delivery of a satisfactory inspection report.

For further advice on organising a building and pest inspection, speak to Monika Bonet – Principal of Raine & Horne Glenelg today or visit rhglenelg.com.au.

What is the ripple effect and how will it affect my home purchase?

Many house-hunters can be guilty of focussing on the location of their home purchase to the detriment of all else. But it is also important to consider the ‘ripple effect’ when selecting the location of your home.

The ripple effect refers to the situation where buyers might be priced out of a street or suburb, which leads them to look nearby at more affordable precincts. In turn this starts to push up real estate prices in the adjacent suburb or street, and this is the ripple effect.

The ripple effect is probably more common in suburbs that are on the rise and/or on the edge of more popular areas. Other factors that can create the ripple effect include proximity to public transport, schools, shopping centres, childcare, parks and beaches, which are all factors popular with home buyers and help underpin property values. On the flipside it is also important to be aware of any future development plans for your target areas, as these could impact your selected property’s value, and your quality of life.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

When media reports start talking about static or falling home prices, many homebuyers think that it’s a good idea to watch the market and wait for it to reach the bottom. They feel that if they postpone their purchase long enough, they are likely to see prices fall further and snap up a ‘real bargain’. 

While bargains do exist, of course, for people who are in the right place at the right time, there are often more people who miss out by using this strategy than gain.  Most homebuyers buy their family home and live in it for, on average, seven to ten years.  And when we’re looking at averages, the property market continues, in the big picture, to rise. Based on historical property cycles, property may undergo periods of static growth and periods of galloping growth, but on average, well-located, well-selected residential property doubles in value every ten years or so. Certainly, if we could always pick the lowest time to buy and the highest time to sell we would do very well indeed, but the only buyers who need worry about the immediate state of the market are the real estate speculators who wish to buy then sell again straight away, or those who are too highly geared or who have entered into unrealistic amounts of debt. For everyone else, the chances of strong long-term capital gain are virtually assured, provided they buy well-selected property in well-selected locations.

It’s famously difficult to pick the ‘bottom’ of the market. Often buyers who wait find themselves having little to choose from as listings get scarce – and a sudden flurry of competition for the few desirable properties actually on the market for sale often causes them to sell for higher prices than expected, even in a market described as a difficult one for sellers.  Buyers end up paying more than they bargained for if they  keep on watching and waiting;  because the ‘flurries’ they waited out were signalling an upturn in the market or the end of the halcyon days for buyers.
 
Purchasers who wait too long for a ‘bargain’ or the ‘lowest point of the market’ often only realise that the lowest point has already been reached once they can look back on it with the 20/20 vision of hindsight.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Ragement Expertseal Estate Agents and Glenelg Property Management Experts.

Raine & Horne South Australia CEO, Kevin Magee answers the top real estate questions every month including “HOW’S THE MARKET?” in South Australia and “WHAT DOES THAT MEAN FOR ME?” in the process identifying real estate opportunities, clarifying trends and providing property market tips for Raine & Horne members, Buyers, Sellers, Investors (Landlords) & Tenants.

For ongoing & concise property updates, media scoops and tips follow Kevin on Twitter @rhSA_CEO or contact Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

“It’s sometimes hard to work out when interviewing a new Glenelg Landlord, why they may feel vaguely dissatisfied with their incumbent property management service” said Ms Bonet Principal – Raine & Horne Glenelg.

“When you sart talking to them you know straight away it’s not working for them, but you can’t put your finger on why?”

“Our experience with our Glenelg Property Management business is that most property investors want to communicate with one person for their day-to-day needs” said Ms Bonet. ”They don’t want different jobs to be managed by different personnel (task management); they want their whole portfolio to be looked after (whether they own one property or several) by one person who is responsible for all tasks relating to their properties – arrears, re-letting, repairs and so on”.

When it comes to hiring a property manager, here is a checklist you can run through to reassure yourself that your agent is doing the best thing by your investment. Here’s a checklist thatall Property Investors should ask themself;

1. Does your property manager talk to you on the phone or does he/she send emails or text messages? Most landlords are baby boomers and prefer to discuss things directly when there is a problem so if you feel your property manager is hiding behind emails or text messages when you need to talk, let them know.  
    
2. Do they respond to your requests quickly? Property managers who take longer than half a day to respond to phone calls and emails are letting you down.
    
3. Most landlords prefer minimal vacancy; it’s obvious that even a week’s vacancy is money that will never be recouped.  If your property is vacant, don’t let your property manager ‘give it another week to see how we go’. If it isn’t rented in 10 days, it’s time to drop the rent by 10%.
    
4. Are you getting the best referenced tenants? Keeping the rent at 95% of market value minimises arrears, vacancies and maintenance – and therefore increases net return although the rent is slightly below market. Landlords who go for the highest rent lose money in vacancies and repairs – so check that your agent isn’t setting the rent too high.
    
5. Does your property manager keep you informed about further ‘good’ investments? This could be via an email with links to their website and properties for sale.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Raine & Horne South Australia CEO, Kevin Magee answers the top real estate questions every month including “HOW’S THE MARKET?” in South Australia and “WHAT DOES THAT MEAN FOR ME?” in the process identifying real estate opportunities, clarifying trends and providing property market tips for Raine & Horne members, Buyers, Sellers, Investors (Landlords) & Tenants.

For ongoing & concise property updates, media scoops and tips follow Kevin on Twitter @rhSA_CEO or contact Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

When a tenant moves into a property, both the tenant and the managing agent/landlord are required to complete a condition report.

“This report is an extremely important document as it is a record of the condition of the premises at the start of the tenancy” said Ms Bonet, Principal of Raine & Horne Glenelg.

Ms Bonet said “When completing a condition report it is not a quick process of ticking and flicking that everything is clean, working and undamaged.  Extreme caution and time needs to be taken to describe all of the fixtures and fittings.”

This includes:

• The colour of the carpets and walls,
• A full description of the window coverings and light fittings,
• Detailed information on appliances, including the make and model,
• A list of any inclusions, etc.

“If you fail to adequately describe the inclusions, fixtures and fittings it can cause unnecessary disputes at the end of the tenancy or lead to a possible financial loss for the property owner” said Ms Bonet.

“For example, if you just tick window coverings as being good and undamaged and fail to describe them, the tenant can leave any form of window coverings when they vacate.” “Or if the tenant decides to paint a bedroom hot pink and the condition report just has walls ticked as good, you will be unable to enforce that the walls be returned to the original neutral colour, as the tenant decide to be difficult and disputes it” said Ms Bonet.

The more detailed the condition report, the easier it will be to over-come pending disputes at the end You can be confident that our property management team are very thorough when completing condition reports to protect your investment.

As well as describing the fixtures and fittings, it is equally important that the property is presented in a clean and safe condition from the outset. 

Upon vacating, the tenant is required to leave the premises in the same condition (allowing for fair wear and tear) as it was at the commencement of the tenancy. If the property was not clean, the lawns were not mowed, there were weeds in the garden and marks on the walls, then the tenant can leave the property in the same condition – or often they leave it worse with no recourse for a claim.

Ms Bonet said “Once again, you can be confident that our office is constantly working towards protecting your investment, which includes our team taking a little extra time and effort to be thorough with our documentation when a tenant moves into the property.”

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

“You can claim a deduction for certain expenses you incur for the period your property is rented or is available for rent”  Monika Bonet, Principal of Raine & Horne Glenelg said.

Ms Bonet further noted “However, you cannot claim expenses of a capital nature or private nature – although you may be able to claim decline in value deductions or capital works deductions for certain capital expenditure or include certain capital costs in the cost base of the property for capital gains tax (CGT) purposes.”

Types of rental expenses

Ms Bonet stated that there are three categories of rental expenses – those for which you:

• cannot claim deductions
• can claim an immediate deduction in the income year you incur the expense
• can claim deductions over a number of income years.

For a detailed understanding of all rental property expenses Ms Bonet  recommend that you visit the following web link of the ATO and download a copy of their 2008

http://www.ato.gov.au/content/00131327.htm

This guide explains how to treat rental income and expenses, including how to treat more than 230 residential rental property items.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Most investors agree that successful ownership of residential rental property is all about maximising long term net income.

“Novice investors and property managers often simplify what is a complex interplay of forces and focus on the amount of rent being achieved right now,” Monika Bonet, Principal of Raine & Horne Glenelg said. “Because tenant harmony is a crucial part of the income equation, most experts agree that setting rent at 95% of market value usually achieves a higher income long-term than holding out for a 100% or more. Tenants paying top dollar are more likely to be finicky about the standard of the property, and make more demands for repairs and improvements. Furthermore they tend to start looking around to see what else is available for the money and move on if they find better value.”

Ms. Bonet said that the more often a property is vacant, especially if the advertised rent is high, the more chance there is of vacancy and loss of income.

“Even a few weeks vacancy per year can significantly reduce the investor’s return, thereby requiring an even higher rent to make up for it and setting a negative pattern in motion,” Ms. Bonet said.

According to Ms. Bonet a related factor that is often poorly handled by novice investors is the market rent review.

“Property investment managers carry out market rent reviews on a regular basis and the rents are raised according to supply and demand,” Ms. Bonet said. “Novice investors often think the best approach to raising the rent is to make frequent small increases, but these are seen by tenants as penny pinching and lead to disharmony, increased demands for repairs and higher vacancy over the long-term. Experts say that in most cases rent increases should occur when market indicators show that a 5% increase is warranted.”

Ms. Bonet said that experienced property managers report that the most stable income and long term optimum return is gained by investors who follow the advice of the experts they have selected to manage their investments.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Houses have changed a lot since the 1940′s. So has the way we live in them. The emphasis is on space and flexibility with kitchen / living areas flowing onto rear gardens or terraces.

“Houses have turned back to front,” Monika Bonet, Principal of Raine & Horne Glenelg said.

“The focus is no longer on a formal “front parlour” or how the house looks from the street. Increasing density of living has made people more aware of the need for privacy.

 The result?

 Living and entertaining areas are now concentrated in the back areas of the house. Guests are even allowed into food preparation areas that would have been taboo in previous eras.”

According to Ms. Bonet, one of the reasons for the turnaround is that there are more women in the work force than ever before.

“Working women don’t want to come home to solitary confinement behind the kitchen sink,” Ms. Bonet said. “Family members share the cooking and guests and chefs make merry while the cooking is in progress.”

 Ms. Bonet said the kitchen has coped by becoming more of a showplace. Technology has made cooking easier and devices such as the extractor fan keep odours from permeating open plan living spaces.

“House size is the most striking change in the last half century,” Ms. Bonet said. “Families are smaller, yet houses are twice as big as 1940′s houses – they’ve gone from one hundred to one hundred and eighty square metres. Kids nowadays wouldn’t dream of sharing a bedroom. There’s more internal space per head of population, yet we expect to move on to something better every seven years or so.”

According to Ms. Bonet today’s home owners are more mobile, both geographically and socially. While most of our parents lived all their life in one place, we view houses as stepping stones to better investment and lifestyle benefits.

“The motor car, highways, immigration, technology, feminism and the pill have all had an impact on housing structures,” Ms. Bonet said. “Houses reflect both technological and lifestyle changes. Modern owners have less sense of home as the family seat, belonging to the family for a lifetime or even for generations. The modern home is an asset which, adroitly managed, can move us up the social ladder.”

This blog post was brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Everybody knows how to check a tenant’s references. Don’t they? After all, secure tenancy forms the foundation of successful investment.

 ”In fact, it’s often a case of a little knowledge is a dangerous thing,” Monika Bonet, Principal of Raine & Horne Glenelg said. “Many people don’t know which questions to ask and how to analyse the information they end up with. Investors need to feel confident their property manager is experienced – after all maximising investment income is entirely dependent upon keeping arrears, vacancies and repairs and maintenance to a minimum and yield and capital appreciation at a maximum.”

Ms. Bonet said that two most important background checks are previous rental history and employment record.

“This sounds straightforward but there are many traps for the inexperienced – it comes down to knowing what the information means in terms of tenant performance,” Ms. Bonet said. “For example tenants might pay their rent up to date upon vacating but might have been a problem during the tenancy. Or someone might be in full time employment for many years and still not be a good tenant. One or two factors are insufficient to build up a profile of the prospective tenant. But too much information might see someone turning away potentially good tenants and ending up with a longer vacancy. Landlords managing for themselves often get too involved to be impartial.”

 According to Ms. Bonet the mistake most inexperienced people make is to rely on personal references.

 ”In all my years of managing property I have never seen a bad personal reference,” Ms. Bonet said. “Friends and relatives just don’t write negative things about those close to them and even if they do prospective tenants are not going to offer bad references to landlords or agents.”

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.