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With the price of land in capital cities rising, and the size of blocks falling, many investors are now looking to alternatives, such as Brisbane and Melbourne, where there are many opportunities to buy in growth areas at affordable prices and good returns. If you would like to know more, please contact me here >

The cost of vacant land has continued to increase in capital cities over the past year providing the impetus for growth in the cost of established housing stock.

The median price of vacant land sales nationally as at June 2016 was recorded at $212,000.  The median price has actually decreased by -2.3% over the past 12 months.  Although nationally median prices are lower there has been a divergence between price growth across the capital city and regional markets. 

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If you own a property in Sydney or Melbourne, chances are, it’s racked up massive growth in value during the past couple of years. With your newly gained equity, you’re now a whole lot richer – at least on paper.

But don’t assume that this added equity lasts forever. As the market slows down and values start to plateau or drop, you’ll find your equity could also start to dwindle. Therefore, you want to make the most out of your newly acquired wealth while you have it.

But to access it, you need to either sell or take up a new loan to unlock the equity. If you don’t have any compelling reasons to sell, you could consider opting for the latter.

"You need to sell or take up a new loan to unlock the equity in your home."

By taking up a loan against your equity, you’re able to hold onto an income-producing asset that’s growing solidly while building your portfolio.

What is equity?

In simple terms it’s the difference between the current value of your property minus the mortgage on this property.

For example:

  • Current property value: $600,000
  • Mortgage: $300,000
  • Equity gained: $600,000-$300,000= $300,000

 

In theory, you have $300,000 equity that you can access. But in reality, you can tap less than that.

That’s because the banks will only lend a portion of the property value – at many banks, this amount is 80%. So in this case:

  • 80% of the property value: $600,000 x 0.8=$480,000
  • Mortgage: $300,000
  • Accessible equity: $480,000-$300,000 = $180,000

As you can see, it’s considerably lower than the theoretical amount, but this is still substantial amount. You could use this equity as a deposit for another property, provided you have the income to support it.

How to lock in your equity

When it comes to accessing your equity, there are generally two financial options: topping up your existing mortgage or taking up a line of credit.

Loan top up

This essentially means you’re using your existing loan to borrow by adding to it. It’s a little bit like increasing your credit limit on your credit card.

Advantages can include not having to apply for a new loan with a new lender as all your loan documents are already on file. You may also save some cash on loan establishment fee or monthly fees. Generally, topping up a loan is the easiest way to access your portfolio.

The downside is that your repayments will likely become significantly higher due to your bigger mortgage. The banks are also now quite strict with their policies and some only allow top ups for investment purposes.

Line of credit

A line of credit (LOC) is a separate loan taken against the property and it works a little bit like a giant credit card limit, where you only pay interest on the money you spend. They are favoured by many investors because of their flexibility.

The downside is that it can have higher interest rate compared to a standard variable rate.

Top tips for accessing your equity

Ensure your property is well-prepared for valuation

Before you can access equity, the banks will arrange for a valuer to do a valuation on your property.

Once the valuation comes back, the lender will then use that to assess how much they are prepared to lend.

Therefore, you want to make sure you’re getting the best valuation possible by ensuring there are at least three recent sales that are similar to your property and they have achieved good sales price. You should also make sure the property is well presented.

Ensure your documents are current

You could be able to significantly fast-track your loan application by having these documents ready:

  • Three most recent pay slips
  • Two years’ worth of tax returns if self-employed
  • Employment contract showing your level of employment.

Be clear about the purpose of the loan

Lenders want to know what you want to do with the loan. Be clear and specific about your purpose. If you’re buying another property, they want to see the Contract of Sale. If you’re using it for something else, be aware that lenders may not allow you to access all your equity amid the new tighter lending environment.

Buy a solid property that lenders like

This is not only smart investing but also practical. If the lenders are not willing to lend against a property, this usually means it’s too risky for them. Therefore, aim to buy a property with solid fundamentals so that the numbers stack up.

Don’t borrow too much, even if you can

It’s easy to overextend yourself when there’s a large amount of equity waiting to be accessed. But there are big risks involved, because the bigger the loan amount, the higher your repayments are going to be. There’s also an added risk of falling into negative equity. This is when your debt is higher than the property value as a result of falling prices.

 

For more information on getting started with property investment contact us here >

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Are you trying to decide between making an investment in a unit or a house? Well take a step back, because there are a few key factors that you should consider first.

In some markets, a house may be a better option, in others a unit may reap better gains. So to make the most of your hard-earned money, you really need to do your research before you invest in either type of property.

Simon Pressley, Managing Director at Propertyology, says comparing units and houses as a property investor is like comparing banking stocks and medical stocks as a share investor. It is all dependent of the state of the market, whether that be the property market or the stock market.

But when it comes to property, somehow people get sidetracked by the fact that property is a tangible asset, one that we can see and touch.

“What’s important is for the investor to not focus on the property itself but instead to focus on the market,” Pressley says.

“What actually grows is the economy. A property itself is a static commodity; it’s the market around it that grows.”

Here are Pressley’s top three considerations to check off before you begin to weigh up which property type to go for:

  1. Economics: Assessing economic drivers in detail will lead you to narrowing down the right property market.What is happening in a particular market? What drives the economy? Does that particular industry have staying power? Which towns and cities have the potential to create jobs in the future?
  2. Supply and demand: Check the investment statistics of your chosen market. How many houses are there and how many units are available? How many houses and units will be available in the future? Because property investment is a long-term decision, don’t just look at what’s being built, but also at what’s been approved. There may be an undersupply now, but if a planned community has been approved, that may mean an oversupply of units or houses in the future.
  3. Affordability: As an investor your objective is to make money. To do that you need to buy properties that are in-demand. And the number one driver of competition? Price. Contrary to popular belief, demand for highly desirable, high-end suburbs is not as high as the more “meat-and-potatoes” type suburbs, Pressley says.

If you refer to these key factors when considering a property investment, you’ll then be in a position to weigh up which property type to choose.

Once you’ve reached that stage, there are certain risks and advantages you need to know.

Investing in apartments

Archers the Strata Professionals Partner Andrew Staehr says apartments offer an affordable entry point into the market, in locations that may be beyond an investor’s budget if they were looking at houses.

“Highly sought-after (inner-city) locations are more attractive to tenants; offering higher rental yields and investment security,” Staehr says.

The potentially lower price point may also allow an investor to build up a diversified portfolio quickly.

Another advantage of investing in an apartment in a strata scheme is that insurance, maintenance and upkeep are provided by the body corporate.

“If you own a house, all maintenance issues are your responsibility, whereas the maintenance and care of an apartment building and its surrounds are the responsibility of the body corporate,” Staehr says.

Pressley says to avoid big complexes with features that tenants are drawn to, like lifts and swimming pools, because they will force the body corporate fees up considerably.

“They are the features that when need replacing cost a fortune,” he says.

The specific size of the building is important, but it changes depending on the location. In a capital city like Melbourne, a complex with 50 units is not considered big, but in a regional town like Ballarat, that would be considered a monstrosity. In a regional town, 12 lots would be more appropriate.

Pressley says to not get too caught up on whether or not the property has a balcony or a courtyard – that doesn’t necessarily make it a bad investment. If there is no demand in the market for those features, then it’s not important.

Investing in houses

When it comes to houses, you have to pay 100% of the insurance and 100% of the maintenance and upkeep fees. Every single thing that happens to the house is your responsibility.

"If you own a house, all maintenance issues are your responsibility."

“Within my own personal portfolio, I’ve had instances where I’ve had to fork out $15,000 for a roof. When those things are needed for an apartment, you get the benefit of economy of scale,” Pressley says.

“(With an apartment) you’re paying body corporate fees in lieu of the general maintenance and insurance outside you’re apartment. That’s probably a comparable cost.”

One advantage to keep in mind when considering a house, is the value of land.

Land appreciates over time, so even if all you can afford is a regional or outer suburb house – it could be a wise choice, provided you have assessed the supply and demand, affordability and economic factors outlined earlier

So you’ve looked at the pros and cons of investing in houses and units, and you might be ready to dive in, but is there a right time to buy a particular style of property?

Units vs houses in today’s market

“The answer to this question is always the same,” Pressley says. “There’s not so much a good time, as a good market.”

“It’s important for the investor to refer to economic drivers and affordability… this will lead to a particular market. Then look at the supply and demand for apartments and houses in that market.”

It is true, however, that as a nation Australia is building (and buying) more apartments than ever before, particularly in capital cities.

Property hotspots: Regional areas to watch

But some of the regional cities are actually building at the normal rates, and some have lower unemployment rates.

“There’s a misconception that regional means risk,” Pressley says. “That’s just an assumption formed by naiveté from people who haven’t lived in a regional area.”

 

For more information on getting started with property investment contact us here >

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Finding houses to buy or rent is easy. Finding the perfect house to buy or rent that suits the specific wants and needs of everyone who’ll live in it is the real challenge.

But there are a number of ways to ensure that your house-hunting journey ends with a property that everyone can be happy with.

"All too often buyers and renters tread water trying to find the perfect property."

Communication & compromise

It seems simple, but if no one is willing to budge on certain details of their dream home, you’ll still be searching for a place to live when the rest of us are driving electric cars and having robots do our gardening.

Kristen Hatt from buyer advocates WoledgeHatt says that all too often couples, families and renters treaded water while trying to find the perfect property because they wouldn’t give any ground.

“They’re both looking for different things and often what they’re looking for and what they need they haven’t even considered,” Hatt says.

“It’s just through communication that you work out where the most important things are. We had a house we bought last year and the husband was so specific on the address in terms of proximity to the station and things that he didn’t really care whether the house was falling down around him.

 

“And then the wife has got a small child and another one on the way and the functionality of the house was far more important for her. In the end we actually found something that worked for both in an area they hadn’t really considered.”

Get the inside word

Register with local agents who can give you an instant heads up when a suitable property crosses their desk.

Nelson Alexander real estate agent James Pilliner says receiving a tip-off from a local agent was a huge advantage.

“They can tell you about things that trade off-market, which is probably roughly 10% of the sales. If you’re not registered with an agent you never have any clue about that,” he says.

Relocate your perfect location

In the current property climate, getting everything you want from a house in the location you want it is an increasingly challenging proposition. Add in your partner or future housemate’s ideas on where the perfect place might be and you’ve got a one-way ticket to a giant real estate roadblock.

"Be open to surrounding suburbs to widen your property search."

So consider a more affordable suburb nearby, or one where you’re more likely to get what you want for your hard-earned dollar.

“Sometimes people think they know where they want to be but they could actually be in other areas that would work better,” Hatt said. “Other times they focus on something so much and it’s not what they can afford and they’re never going to get quite what they want, when the next suburb out can give them a much better outcome.

Get alerts & get in first

Use our very own Real Estate Alert system and you’ll receive an email the moment a property matching your criteria hits the market.

Getting in first is often the difference between snaring and missing out on a house that’s just right for you.

"Be the first to view a property with a private sale."

“If you can find properties that owners are willing to sell prior or that are private sales, you can be the first in to view it and the first to buy it. We’ve sold half a dozen properties this side of Christmas where they’ve been a private sale and they’ve sold within probably a week of being marketed and that’s because those buyers are onto it quicker than everyone else,” Pilliner says.

Size isn’t everything

Can you live without land? If a huge block is something you or your co-inhabitants are prepared to sacrifice, your options will open right up.

And your bank account will thank you for it.

“If you’re talking inner-city real estate, it’s land size that you’re compromising on,” Milliner said. “Your perfect house might have a 250 metre allotment, but you might end up having to look at something that’s 170 to 190 metres in size because it’s drastically going to reduce the price.”

 

For more information on getting started with property investment contact us here >

 

 

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You’ve read the books, magazines and reports. You’ve been religiously checking realestate.com.au for properties.

Yet when push comes to shove, you get stopped.

You’re not alone. In fact less than 6% of Australians, or roughly 1.3 million people, own an investment property, even though property is a national past-time.

It’s not surprising. A lot of people get overwhelmed by the process and quit before they even begin. But it doesn’t have to confound. Reality is, property investing is relatively straightforward.

To help you begin your journey,  here’s eight steps to starting a property portfolio on a solid ground, without losing your mind.

1. Check your finances

This can be as simple as listing all your assets, including incomes and work out your expenses.

This will give you an idea how much cash you have available to invest. Don’t immediately assume that you can’t afford to invest. As long as you have a stable and reasonably good paying job with solid employment history, you shouldn’t have a problem getting a loan.

2. Get a pre-approval

You can get pre-approval through your lender directly or through your trusted mortgage broker. Going through a broker before applying for a pre-approval can be beneficial if you’re not sure you’re financially ready to invest.

Applying for multiple pre-approvals is not a good idea. Each time you apply, the lender will check your credit record. If there are multiple inquiries, this sends a red flag to the lender and may refuse your application.

Top tips

 

  • Find out if you qualify for a loan
  • Check your credit rating
  • Consider reducing your debt or credit card limit

3. Set your goals

 

What are you looking to achieve? What does success look like to you? Property investors generally invest in property to secure their financial future or to be free to do what they want, when they want it.

In order for you to achieve your goals, you must first articulate what your goals are. More importantly, you need to set a deadline as to when you want to achieve these. Then you can work backwards.

For example, if you’re looking to replace your income and retire on your investments within 10 years, you can start by creating a 10-year plan, broken down further to 5-yearly, yearly, bi-annual all the way down to weekly timeline. This way you don’t get overwhelmed by the enormity of the task.

4. Understand your attitude to risk

Your risk profile will dictate your strategy. What sort of risk can you tolerate?

Getting an understanding of your own attitude to risk will help you create a strategy that reflects this.

5. Start budgeting

It’s not sexy. It’s not even remotely interesting. But budgeting is the only way to ensure you’re able to balance your income and expenses. It allows you to see where you’ve been spending your money and helps you to plan for bigger expenses down the line.

There’s good budgeting software available, such as this budget planner and this spreadsheet tool.

Make sure to set this up even before you start looking for a property.

6. Create a purchase plan

What does an ideal purchase plan look like?

It should facilitate your goals of growing your portfolio to a point where it’s producing the growth or income you’re aiming for. It should serve as a structure for you to stay in the game.

Here’s an example of a purchase plan you can follow:

  • Define your strategy
  • Set up your criteria
    • Do your research
    • Cull your list
    • Get appraisal
    • Do your due diligence
    • Make and offer and negotiate

7. Be informed

Use the tools available to you to make an informed decision. Knowing the market can be key to making the right investment choice. Explore realestate.com.au/invest for some valuable insights.

Being informed also means being wary of get rick quick schemes and property peddlers. If someone is promising you guaranteed returns and overnight riches, walk away; the only person getting rich is them.

There’s no such thing as a property psychic and while there are tried and true methods to research, no one can make guarantees. Understanding your tolerance for risk will help you shape how much you’re willing to take on over the shorter and longer term.

8. Stay focused

Make sure you stay focused. Investing in property is a business decision, not an emotional reaction. 

  • Get clear about what you want to achieve
  • Set a date as to when you want to achieve this goal
  • Identify milestones you need to do to get to your goals

It’s easy to get overwhelmed when you’re starting something new and as massive as property investing.

But don’t give up. Just imagine in 10 years, if you buy the right properties this year, you could be sitting back, feeling happy, secure and even proud that you bought properties that more than doubled their values while your peers and everyone else wishes they’d bought back in the day.

How good would that feel?

For more information on getting started with property investment contact us here >

 

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At Organised Finance, we know how important it is to have the right finance structure to suit your circumstances.

 

We work with over 40 Lenders to ensure we can provide the best rates and products, whatever your situation may be. We look to save you money at every opportunity,

and save you time from having to shop around. We come to you and assist you through the whole process.

 

Organised Finance can offer you:

 

- Home Loans

- Investment property Finance

- Construction Finance

- Refinance

- Deposit Bonds

- Vehicle and Equipment Financing

- Personal Finance

- Commercial Finance

 

Through our industry experience, we can offer advice on all aspects of financing, whether it be for property or otherwise.

 

Call Ian Zuman on 0403 587 887, and follow us on Facebook and LinkedIn.

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DISCLAIMER:  The information contained on this website is provided for general education purposes only and does not constitute specialist advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy.