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Working out how much an investment property will cost to hold isn't that difficult. In fact, it's something you can quickly work out on the back of an envelope. Think of it like this. On the one side you have income (rent) and on the other you have expenses (loan interest repayments, rates, property management fees, insurance and maintenance costs). So if you took out a $300k loan on a property that receives $400 per week rent. The holding costs will be worked out as follows: Income Rent: $20,800 per annum ($400 x 52) Expenses Mortgage repayments: $21,000 per annum (based on 7% interest only rate) Rates: $1200 (a rough figure that will change from council to council) Property management:…
This recent report by one of Australia's largest mortgage insurers states that First Home Buyers are reported to be in less mortgage stress than any other borrowers. A snapshot of the executive summary is below - the entire report is also attached. "The Genworth Homebuyer Confidence Index (HCI) measures the sentiment of mortgage holders and would-be mortgage holders about their own mortgage and the overall mortgage market. The Genworth HCI is based on five factors: the proportion of monthly income used to service debts, maximum loan-tovalue ratio (LVR) comfortable in borrowing, last 12 months repayment history, next 12 months repayment expectation and whether it is a good time to buy a home. Overall findings • The national Index fell (2%)…
Monday, 18 April 2016 10:22

Principle and Interest or Interest Only?

A question we’re always asked is “should I be paying interest only or principle and interest on my loans?” When it comes to claiming an investment loan as a deduction – only the interest portion of the loan is tax deductible. The principle portion is not. Therefore, if you have an investment loan, and you decide to pay off some of the principle each repayment, you’re effectively reducing this tax deductible debt – meaning there is less tax you can claim back. This can be a costly mistake for those who also have non-deductible debt (which most of us do). This includes a home loan on your Principle Place of Residency (PPOR), car loans, personal loans, credit cards, etc. If…
Monday, 18 April 2016 10:20

Your first home or an investment?

A question I’m often asked is whether people should buy an owner-occupied property first or an investment property. What most don’t realise is that it might be possible to do both. A client could purchase a property that needs a cosmetic renovation, add value to it and then leverage into the world of investing. Accessing this newly created equity means they could fund a deposit and costs on their first investment purchase. With this strategy, the client also gets to take advantage of government bonuses like the First Home Owners Grant (FHOG) and stamp duty concessions. As an example, take Mike and Kate who recently purchased a $400,000 property in the Australian Capital Territory. They were able to take advantage…
So you've saved your 20% deposit and enough funds to cover the purchase costs and are ready to venture out and buy your first property. This might sound crazy, but have you considered the downside to using all of your hard earned savings to cover the 20% deposit towards your first purchase? Most people believe it's in their best interest to save the large 20% deposit and put it all towards their first property because that way they can avoid paying Lenders Mortgage Insurance (LMI). What a lot of people don't realise is that this can be a costly mistake in the future - particularly if the property turns into an investment property down the track. Let's look at a…
Monday, 18 April 2016 10:16

Accessing equity when you don't need it

Time and again, I receive the frantic phone call from a client who has found a property, had their offer accepted and needs to arrange finance in a hurry. This is usually not an issue – except when they also needs to access equity in another property to get the deal done. In a perfect world, we’d have already accessed equity for the client so they had the funds available to them to cover the deposit. This saves a lot of time and stress. For anyone serious about investing, it’s a good idea to access equity when you don’t need it. Here are some reasons why. First and foremost, if a good deal presents itself you want to be in…
Monday, 18 April 2016 10:13

Taking advantage of the buyers market?

We were asked by the team from Steve McKnight’s www.propertyinvesting.com website to provide some comments on the current state of the market. The article is below. The general consensus in the Pass Go office is that the property markets across most major Australian cities remain stagnate which is providing some excellent opportunities for investors. The demand in the low to mid price range in the Sydney market, particularly out west, has softened which could be due to the removal of the First Home Owners Grant for established dwellings. In Canberra, it’s a good time for those looking to upgrade with the market for homes above $600k attracting less competition than properties at the lower end of the market. We are…
Monday, 18 April 2016 10:10

Are property prices falling?

A question I'm frequently asked is "what's the property market going to do within the next 12 months?" It's not an easy question to answer. In reality, the Australian property market is made up of thousands of smaller markets - all at different stages of the property cycle. Herron Todd White produces a monthly report that analyses the performance of each capital city and large regional property market across the country. At present, they have the Canberra and Hobart housing markets pegged as declining, Brisbane and Melbourne at the start of a recovery and Sydney, Darwin and Perth on the rise. A full copy of the Herron Todd White report is available here. Domain have also recently released their Housing…
The following is taken from http://www.accreditedbroker.com.au/ 12 March 2014 hardly sounds like a key date in history. But, for those looking to buy property, 12 March 2014 could be a key date that determines whether or not they get a loan. Whenever someone applies for a mortgage, one of the first things a bank does is run a credit check on them. As of 12 March, these credit checks are going to change – and it could have a huge impact on whether or not a loan application is approved. Under the new regime, every time someone misses their payment by more than five days, their credit file is given a black mark and their credit rating gets worse. The…
Monday, 18 April 2016 10:04

Thinking about fixing?

Have you been thinking of fixing your home loan? Fixed loans are quite attractive at the moment with most banks offering two year fixed rates for under 4.99 per cent – with some going as low as 4.59 per cent. With rates so low, I think it’s worth considering. Property markets are on the rise in most capital cities, especially Sydney and Brisbane, and in my opinion it’s only a matter of time before rates start heading up. However, before fixing your loan, there are a number of things to consider. Firstly, consider keeping some of the loan variable. That way, you can still take advantage of flexible features that are common with variable products such as extra repayments, redraw…
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