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finance

Dec 15
0

Will we see Apartment prices drop in Sydney and Melbourne?

By | best investment, Building, chinese investment, foreign investment, Uncategorized | No Comments

The Sydney and Melbourne unit markets in particular have been buoyed by Chinese investors, but six months on from a bank clampdown on foreign lending, will we see apartment prices drop in Sydney and Melbourne?

The word has been that apartment prices in Sydney and Melbourne may drop because of over-supply but the real danger may be the thousands of Chinese property investors who bought apartments in Australia are now scrambling to save their investments. Already, a number of apartments bought off-the-plan by Chinese investors have failed to settle due to the buyers being unable to secure finance for settlement.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home.

In these cases, the developer is entitles to keep the 10% deposit paid at exchange of contract and on-sell the apartment. In many cases it makes sense to reduce the price of the apartment for a quick sale. With possibly hundreds of new apartments being on-sold ‘below original cost’, this would soon affect the whole city-wide apartment market. Read more: http://www.abc.net.au/news/2016-11-28/chinese-property-investors-worried-after-big-banks-change-rules/8062530  Related Story: Tough new loan laws see Chinese investors opting for private lenders

In mid-year year, the major lenders stopped lending to offshore investors in a bid to reduce  risk. Lenders were worried by some applications with fraudulent proof of income, and wanted to rein in lending to avoid being too reliant on Chinese borrowers. These changes are now having a major impact on the property market, particularly in the foreign investor’s favourite locations in Sydney and Melbourne property investment hotspots. For the estimated 50,000 Chinese buyers involved there has been crushing disappointment. It is estimated that up to 30,000 investors are affected.

As well as our Australian lenders, China’s banks have cracked down on money heading abroad, so investors have been left trying to borrow from other Asian banks. With up to 30,000 units unable to settle, it is difficult to see why this will not affect the major city apartment markets. We are more than likely see Apartment prices drop in Sydney and Melbourne over the next couple of years.

If you want to know more about safe growth investment over the next few years contact: info@limepropertysolutions.com.au.

Oct 10
0

Negative gearing does NOT mean you are making a loss!

By | best investment, finance, Financial, Investment, Negative Gearing, Properties, Property Research, Uncategorized | No Comments

Negative gearing does NOT mean you are making a loss!

George Cochrane in this week’s money section in the SMH tells us that negative gearing means we are making a loss – what rubbish! – Negative gearing does not mean you are making a loss! Obviously on paper, a tax loss must be showing before we can claim the ‘loss’ against our tax, but very often the astute property investor is making this ‘loss’ through permitted depreciation only, it is not an actual loss in cash but it ‘transfers’ to money in the pocket after tax. By most definitions, money in the pocket is PROFIT not loss!

mortgage rates

Negative gearing does not mean you are making a loss. Property can be positively geared after tax

Let’s look at a hypothetical apartment bought in one of Sydney’s fringe around 3 years ago. It doesn’t really matter how many bedrooms it has or in which suburb, but for the sake of the exercise, we’ll assume it was bought brand new!

It cost $600,000 and the investor borrowed another $20,000 on top of the purchase price to help pay the stamp duty and legal costs, so $620,000 is owed and borrowed at an interest rate of 4.3%.

$620,0X 4.3% =                                               $26,660.00 per annum interest

Annual rates =                                                 $2000.00

Annual Body Corp =                                        $4000.00

Annual Management fee Inc insurance =      $2000.00

Total costs out           =                                                  $34,660

Less rent @ $570 per week =                                    $29,640

TOTAL ACTUAL ANNUAL LOSS =                          $5020.00

As well as the cash loss of $5020, we then have to add the first year depreciation on a new apartment. A very conservative figure for this depreciation would be $16,000.

Now we add together the actual loss and the depreciation loss ($5020 + $16,000) giving a total tax loss of $21,020 in the first year. You multiply this figure by your actual tax rate to give a very good idea of what you will be reimbursed by the ATO so assuming you are paying tax at the following rates (excluding the additional Medicare levy which can also be claimed) then we have:-

30% tax bracket          –            rebate of 30% x 21,020 = $6306

37% tax bracket          –           rebate of 37% x 21020 = $7,777.40

45% tax bracket          –           rebate of 45% x 21020 = $9459

In EVERY case the tax rebate is greater than the actual cost of holding the property. In Every Case, the owner of the investment is in a stronger cash flow position because they bought the property. THEN we look at the close to 25% – 30% market growth in apartments in Sydney over the last 3 years giving capital growth profit on the $600,000 of (600,000 x 25%) = $150,000 profit before CGT!

In summary, over 3 years on a 37% tax bracket you would be around $23,000 better off in your daily cash and around $150,000 better off in asset!

So keep this in mind if you read the following article which explains that negative gearing means you are making a loss! Negative gearing does NOT mean you are making a loss! Read more here: https://goo.gl/iJX5Ow

Oct 05
0

Guide to buying property with your partner

By | best investment, finance, Financial, Investment, Property Solutions, Real Estate | No Comments

Guide to buying property with your partner

Today we have two very good articles which offer a guide to buying property with your partner and many other financial issues that are so often overlooked or completely ignored when two people decide to live together.

I have lost count of the number of couples I have worked with who tell me they are buying an investment property but ‘it has nothing to do with my partner, we keep our financial lives completely separate”.

It’s Spring again and love is in the air so it’s maybe a great time to sit down with your significant other and sort out some problems you may face if you decide to go your separate ways at some point in the future. Probably the two most important issues to recognise are:

  1. If you have been living together for two years or more, then under Australian law you will be treated in the same way as a married couple.
  2. Understanding point 1 above, you should try to steer clear of potential sexually transmitted debt.

Moving in together with a partner can triggers unexpected tax and financial consequences that are not all bad as there can also be unexpected financial gains from living together. Read here: https://goo.gl/ktYEYg

Relationship Australia research has found that disagreements over money are a stronger predictor of divorce than other commonly cited causes of marital disagreements.

Among other things, the 2015 online survey by Relationships Australia found 7 out of 10 couples said money causes tension in their relationships

A lot of people think that a pre-nuptial agreement is something that can only be done before an actual wedding but it makes a lot of sense to organise a pre-nuptial agreement before you move in with somebody. While it may be easy to keep separate bank accounts, what about the money your partner owes to the Bank? Half could easily become yours! Or what about your superannuation or even the inheritance from your parents that went towards paying off the house you both own or maybe its sitting in your long-term deposit or share portfolio; it may only be half yours!

There are other issues that can immediately affect you for good or for bad and they are all worth checking out. Make sure you do your guide to buying property with your partner. Here is a small list but further information on how they affect you can be found on the above link and below..

  • Medicare levy surcharge
  • Private health insurance rebate
  • Businesses and structures

Find out more at: https://goo.gl/pxcLUO

Aug 16
0

Tax savings on property investment

By | best investment, finance, Financial, Negative Gearing, Properties | No Comments

Tax savings on property investment.

Most property investors are aware of the substantial tax savings on property investment that can be legally claimed against the costs of holding an investment property. This is the time of year when most property investors are reconciling their expenses on investment property to send to their accountants in order to receive the substantial tax refund they are probably now due.

It’s also the time of year that the Australian Tax Office issues statements about the type of deductions they will not consider and also deductions that are sometimes claimed and will not only be refused but may also result in fines! You can read more about this below.

It is timely to remind current property investors that they should also have tax variations in place for this financial year. Too often we come across clients who are finding their new investment property is eating into their monthly cash flow and finding that the investment property they now have is affecting their lifestyle. To be ‘loosing’ or spending an ‘extra’ maybe as much as $1000 per month on an investment can drain resources! This ‘loss’ is then magically returned in the form of a large tax reimbursement of around $14,000 come August or September after submitting their annual  tax return. Of course it’s great to get this lump sum but better to get the extra $1000 or so each month in your pay packet rather than having to wait 12 months to claim it back. This is what a TAX VARIATION can do for you and it is highly recommended that you have your accountant put one in place for you now if you haven’t already done this.

The list of the top 5 dodgiest deductions became claimed this year are described as,

  1. Transportation of ‘bulky goods’ that can be stored at work
  2. Holiday travel that is not work-related
  3. Fake attendance at a ‘work’ conference
  4. Car-related travel that there is no proof of
  5. Rental deductions with no valid basis

 

Basically if you don’t own an investment property, and you want to know more abouit tax savings on property investment, have a look at our FAQ’s – “What is negative gearing and how does it work” click here https://propertyinvest.co/property-investment-frequently-asked-questions-faqs/

For more information on dodgy deductions, read more: http://goo.gl/q833rr

Aug 01
1

What a fantastic time it is to buy an investment property!

By | banking, best investment, Economy, finance, Investment | No Comments

What a fantastic time it is to buy an investment property!

Tomorrow is the first Tuesday of the new month of August and we must all appreciate what a fantastic time it is to buy an investment property. So why should it be such a fantastic time to buy an investment property? Well, it looks like interest rates will drop again buy even if they don’t drop this time, many of the major lenders have already dropped their fixed rates in preparation for an expected cut this month with probably another before Christmas.

High Yields and very low mortgage costs result in positively geared investment property

High Yields and very low mortgage costs result in positively geared investment property.

Many banks slashed interest rates for the most popular type of fixed-rate home loan in July, as markets bet the Reserve Bank will act to stimulate the economy this Tuesday. New figures from the comparison website RateCity show as many as 18 lenders cut three-year fixed rates in July, across 112 loan products. Fixed mortgage rates are influenced by financial market expectations for official interest rates, and there is a widespread view the RBA will soon take the cash rate to a new record low.

The average reduction in three-year fixed rates during July was 0.19 percentage points, with lenders including National Australia Bank, ANZ Bank, ING Direct, HSBC and Suncorp among those to have cut. The cuts were occurring in anticipation of the RBA dropping the cash rate from 1.75 per cent to a new record low of 1.5 per cent.

The ANZ Bank slashed 0.44 percentage points off its three-year rate for owner-occupiers to 3.85 per cent; NAB cut its three-year rate to 3.89 per cent while the lowest rate on offer was 3.67 per cent from Mortgage House.

 

With fixed rates of under 4% on offer and property yields of over 5% still possible in the right market place, it is almost certain that most property investors would be looking at positively geared property after tax, meaning that most potential investors can now buy a new investment property which would be costing their normal weekly cash flow absolutely nothing!

 

It is a fantastic time it is to be buying an investment property, give Lime a call to find out more!                      Read more: http://goo.gl/g6f9oa

Jul 26
1

By | banking, best investment, finance, Home Loans, Mortgage, News | No Comments

The best investment loan is not the cheapest

As interest rates continue to fall and the prediction being they may fall even further next month, many borrowers and investors are considering changing lenders to take advantage of even cheaper rates; the issue that must be considered, particularly for active property investors is that the best investment loan is not the cheapest!

The lowest investment loan is not usually the best for your investment property

The lowest investment loan is not usually the best for your investment property

There are now over 1000 different home loan/investment loan products in the Australian property market and trying to work through them is even trickier than trying to find the best mobile phone plan to suit you.

The three areas we believe a property investor should be concentrating on are:-

  1. Flexibility – a loan that will allow you ‘movement’. If you decide to move house, or borrow some money for renovations or another investment property, or need to reduce your repayments while the kids are at high school a no-frill loan generally won’t have the redraw facility and you need. In particular you will need sub-accounts, some which will be fully tax deductible, and some that will have no tax deductibility.
  1. Interest rate – we are not suggesting that this is not important, it obviously is. However, a good broker nearly always negotiates a very favourable discount from the advertised rates so working through the advertised rates only can be unhelpful.
  1. Off-set accounts – These can be a great feature. Funds deposited in a standard interest bearing account you will probably earn less than 1.5 per cent a year and interest is normally taxable!  However, when you deposit money in an offset account the interest credited should be the same as that charged on the investment or  housing loan.

Your Lime property investment consultant will explain how an investment loan would potentially impact your financial circumstances. Working with a highly experienced property investment Mortgage broker can help you to explore the implications and perhaps structure your loans in a way that your home mortgage may end up being paid off much faster than you ever thought possible. This type of structure is not possible on a very low interest ‘no frills’ loan so The best investment loan is not the cheapest!    Read more : http://goo.gl/f08Ha1

Jul 06
0

Are you ready for your next property investment?

By | banking, finance, Financial, Home Loans, News | No Comments

Are you ready for your next property investment?

It’s a new financial year, you really need some tax relief, you want to start accumulating wealth for your future and you have decided to buy another investment property, but are you ready for your next property investment?

The first thing you should probably do is test out your borrowing capacity and ensure you have the funds to go ahead to make sure you are ready for your next property investment.

It's a good idea to check your credit rating before applying for your next property investment loan

It’s a good idea to check your credit rating before applying for your next property investment loan

It is surprising that only 29% of Australians have ever checked their credit rating and yet it is possible to do this free of charge once every year.

It is also surprising, as we have seen with a couple of clients in the last year, that your credit rating may be a lot worse than you imagined, simply because you have been managing your finances too well! Your credit rating can be affected simply by considering a change to loans, looking for new loans and switching loan providers. It would seem that the credit rating system views people who are often changing loan providers or credit cards as ‘high risk’ as they may be constantly changing because they are under financial presure to pay their bills. Very often people are changing just to manage their financial position better and have had no problems or late payments at all and yet their credit score is being lowered.

It is also surprising for some to find out that a small problem they had a few years ago and which has been forgotten about after it was cleared up, still have this period reflected in their credit rating.

Sylvia Pennington of the SMH gives us five tips to ensure we use this new financial year to clear up any problems we may have with credit rating agencies. It’s always possible that something may be on your credit record that should not be there and you can appeal. So follow the tips below and ensure that you are ready to buy that next investment property.

Tips for a glowing report

Credit reporting agencies, including Veda, Dun and Bradstreet and Experian, offer consumers a free copy of their credit report every year. Here are some tips to keep yours healthy.

  1. Check your record for defaults and pay any outstanding debts.
  2. If personal data or debts are incorrectly listed, contact the credit agency and the creditor to have them amended or removed.
  3. Establish direct debits to ensure your bills and loan repayments are on time.
  4. Don’t make unnecessary applications for credit – too many inquiries in a short period can indicate you’re in financial distress and send your credit score south.
  5. Prevent debts becoming defaults by alerting creditors early if you’re having trouble making payments.

Read more: http://goo.gl/hzrgj2

May 31
0

Truth about Chinese investment property buyers

By | best investment, chinese investment, foreign investment, Market, Property Research, Real Estate | No Comments

Truth about Chinese investment property buyers

 
It’s time someone helped to get rid of the myths behind the Chinese buying ALL our investment property and have a look at the truth about Chinese investment property buyers.

The idea of Australian residential housing being bought up by foreign owners, particularly the Chinese, just does not stack up. Sure, we go to auctions and it would appear that most of the people attending the auction are Asian but this surly should be of no surprise as, according to our last census in 2011, 2.4 million Australians are of Asian background! That’s 12 % of our population, more than double the number of indigenous Australians.

12% of all Australians are of Asian background. The Asian community are prolific property investors

12% of all Australians are of Asian background. The Asian community are prolific property investors

The vast majority of ‘Chinese” buyers in our market are Asian Australians. It’s always good to have a scapegoat, it seems it makes us feel better when things don’t go our way and after years of price growth, people priced out of the market are using overseas-based Chinese buyers as the scapegoats responsible for our housing affordability.

The media doesn’t help this perception.  “Chinese” buyers over other ethnic groups such as Indian, French or Canadian have fuelled public concern over whether these buyers are inching the Australian dream further out of reach. The generalisation of the term “Chinese buyers”, to include anyone of Asian appearance or with an Asian surname, has placed local and international buyers in the same basket, and exaggerated the extent of Chinese interest.

So what are the major myths about Chinese buyers pushing prices up by buying investment property? What is the truth about Chinese investment property buyers?

Here are six of the most common misconceptions:

1. Overseas Chinese investors are pricing Australian first home buyers out of the market

Not True – Offshore Chinese investors and first home buyers generally don’t compete for the same properties.

2. Chinese buyers with endless financial means are bringing suitcases full of money

Not True – The majority of average buyers are looking at properties priced between $500,000 to $800,000.

3. Chinese buyers tend to overpay on properties

Not True –   Chinese buyers like to negotiate, and some agents would even say they’re savvy buyers. Sure, they’ll pay a premium if they think it’s worth it, or it has unique features. But so would local buyers.

4. Chinese buyers aren’t concerned about dwelling size

Not True – Chinese buyers are not looking for micro apartments and in a survey they said they do not want to buy a property investment under 50 square metres although they may start off with a smaller investment property because it’s more affordable.

5. Chinese investors leave apartments and houses empty because they’re not chasing rental return.

Not true. Again, the majority surveyed wanted yields of around 5% if possible.

6. Most Chinese buyers shun properties with a street number 4, and the right number play a big part in their decision making

It’s true that the number eight is linked to good fortune and the number 4 is seen as unlucky but the sale price will more likely depend on the property, particularly for younger Chinese buyers.

For full details on this story go to: http://goo.gl/AarvP7

May 24
0

Lose your credit rating without even knowing

By | banking, finance, Financial, Home Loans, Mortgage, News, Research | No Comments

Lose your credit rating without even knowing

How can you lose your credit rating without even knowing that you had done anything wrong?

Cartoon by Michael Mucci Banks seem to have us where they want us

Cartoon by Michael Mucci
Banks seem to have us where they want us

Just a couple of weeks ago we had a new client with a very stable well-paid government job, excellent equity in an investment property, owing nothing substantial to anyone apart from his very manageable investment loan and looking to buy another property but to our astonishment was actually rejected by the first lender approached on his behalf. Another lender was approached and the client had no problem in getting the loan after “the problem” was fully explained.

….. So what was ‘the problem?’ Quite simply, he had approached a couple of lenders by himself over the last year to see how much he could possibly borrow. In his search, he had found very good lower rate deal and switched his loan – no problem. While he was doing this, he took advantage of a couple of really good interest free deals on a couple of credit cards, something that is encouraged by our government and some financial planners, “If you’re not happy with your lender, shop around and move” and why not take advantage of interest free periods on your credit card?

This all seems sensible and very reasonable, until he applied for a new investment loan only to discover that his credit rating had been lowered considerably to the point of him being a bad risk! Like the author of today’s SMH story our client had never defaulted or been declared a bankrupt and had been in well-paid secure employment for over 10 years.  His rating was below 700. The ratings are done on a scale from 0-1000, excellent is 800-1000; very good is 700-799; good 625-699; OK 550-624 and below average was zero-549.

The problem? … every time he applied to a credit-card provider for a new loan or a new card, an inquiry was made to the credit data base and each inquiry, while not raising any concerns, stays on your credit rating and affects your credit rating!

The marks you get because you have changed your loan provider or applied for a new credit card stay on your credit rating for five years until they are rolled over.

Michael Evans conclusion to the article he has written about his own credit rating is,

“In a system where the major financial institutions have significant pricing power, credit score cards can feel like they’re stacked against customers trying to encourage competitive behaviour.

Trying to get one back against the banks comes with a cost, and it’s not always in the fine print.”

I agree, and it’s well worth your time to have a look at the full article on this link: http://goo.gl/Uv6eUz

May 10
0

First Home Buyer’s assistance

By | Economy, finance, Financial, Home Loans, Market, News, Property Research, Real Estate, Research | No Comments

First Home Buyer’s assistance – The state gives a leg-up into home ownership

On the East coast we all know about the first home owner’s grant and the State assistance given with stamp duty but in the West first home buyer’s assistance can include the state gives a leg-up into home ownership by taking a share of the new property!

First Home Buyer’s assistance in WA

Kelmscott Perth

Kelmscott in Perth is one of the many properties in the scheme

During the mining boom as property shot up in value in WA, a new State scheme was sponsored by the WA government. Singles earning between $50,000 and $70,000 a year and couples earning less than $90,000 a year can buy a house, with the state government as a ‘silent partner’ paying up to 30 per cent of the cost.

Over 1000 West Australians on ‘modest incomes’ have partnered-up with the government to buy new homes under a revitalised shared ownership scheme.

The owner may have an 80/20 or even a 70/30 mortgage with the state government of Western Australia. The owner only pays mortgage on the remaining amount and can buy back the government’s portion at anytime in the future. The home is entirely the owners, free from inspections or any other type of tenancy rules.

The properties in the scheme are freshly built and range from one-bedroom units to four-bedroom homes spread throughout Perth suburbs hat include sought-after suburbs such as Subiaco, with some also available in regional centres like Albany and Bunbury.

The scheme was instigated in 2011 after the rapid rise in house costs paralleling with the mining boom which forced many moderate income earners out of the market. That coincided with the 2010 peak in the number of people waiting for WA Department of Housing rentals at more than 24,000.

The scheme is well received in WA and is an obvious real assistance to young people trying to enter the housing market for the first time. I’ve never heard any politician in NSW mention this scheme. Is this something that Sydney could consider to really help the first home buyer with a real foot-up? Full story: http://goo.gl/VbI8hg

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