ON IN­VEST­MENT SUC­CESS

Southern Gazette (South Perth) - - Residential -

From page 34

Mort­gage struc­ture THERE are many op­tions when it comes to struc­tur­ing a loan for your in­vest­ment prop­erty, and it is im­por­tant to get sound ad­vice based on your in­di­vid­ual cir­cum­stances.

Fi­nance Bro­kers As­so­ci­a­tion of Australia chief ex­ec­u­tive Peter White ad­vises seek­ing out a rep­utable ad­viser who is in a po­si­tion to pro­vide im­par­tial in­for­ma­tion.

Key top­ics of dis­cus­sion should in­clude us­ing eq­uity from your own home, choos­ing be­tween a fixed or float­ing in­ter­est rate and whether to opt for in­ter­est-only re­pay­ments.

Mr White said ‘in­ter­est-only’ re­pay­ments were of­ten – but not al­ways – an af­ford­able way to en­ter prop­erty in­vest­ment and had added tax ad­van­tages.

With in­ter­est rates at record lows, it has never been more af­ford­able to ser­vice a mort­gage. But Mr White, the for­mer chief ex­ec­u­tive of Wiz­ard Home Loans, rec­om­mended be­ing pru­dent.

“I al­ways rec­om­mend cal­cu­lat­ing whether you could af­ford to ser­vice the loan at 2 per cent more than the cur­rent rate.”

Tax ad­van­tages WHEN the costs of main­tain­ing your prop­erty and ser­vic­ing your mort­gage out­weigh the rental in­come it gen­er­ates, the loss can be used to re­duce your tax li­a­bil­ity. But opin­ion is di­vided on whether this strat­egy, known as ‘neg­a­tive gear­ing’, is a use­ful tool.

Mr Heg­ney points out that you are los­ing money if you have a prop­erty that is not in­creas­ing in value and you are neg­a­tively geared. “You have to make sure your prop­erty is gain­ing cor­re­spond­ing value to off­set your losses. Don’t ever for­get that you are los­ing money with neg­a­tive gear­ing,” he said.

Mr Heg­ney said neg­a­tive gear­ing could be a use­ful tool if an in­vestor chan­nelled all their avail­able cash into their mort­gage but still saw a short­fall.

Tax de­pre­ci­a­tion was an­other fac­tor all in­vestors should con­sider when pur­chas­ing a prop­erty, ac­cord­ing to BMT Tax De­pre­ci­a­tion Spe­cial­ist Kris­tian Jerom­son.

Mr Jerom­son said it of­fered the po­ten­tial to un­lock a hid­den source of cash­flow and to po­ten­tially save thou­sands of dol­lars at tax time.

“Each per­son’s in­vest­ment needs are dif­fer­ent and they should con­sult a pro­fes­sional ad­viser,” he ex­plained. Land­lord re­spon­si­bil­i­ties SWEEP­ING re­forms were made to the Res­i­den­tial Ten­an­cies Act last year, in­clud­ing to the leg­is­la­tion around op­tion fees, se­cu­rity bonds, prop­erty con­di­tion re­ports, emer­gency re­pairs and min­i­mum se­cu­rity stan­dards.

Land­lords who do not fol­low the new rules could land in hot wa­ter, with ig­no­rance no de­fence for break­ing the law.

REIWA pres­i­dent David Airey said the most im­por­tant role of a prop­erty manager was to en­sure the owner was not ex­posed to any harm­ful legal sit­u­a­tions.

Although prop­erty man­age­ment fees gen­er­ally sat around 10 per cent of the weekly rent, Mr Airey said most agen­cies were happy to ne­go­ti­ate.

“Dif­fer­ent lev­els of ser­vice will at­tract dif­fer­ent fees, and it is all fully tax de­ductible as part of your busi­ness ex­penses each fi­nan­cial year.”

For more de­tails on the leg­is­la­tion that af­fects land­lords, go to: www.com­merce. wa.gov.au.

Cap­i­tal­is­ing on the cur­rent mar­ket With the va­cancy rate in Perth cur­rently about 4 per cent, ten­ants have a se­lec­tion of prop­er­ties to choose from. To min­imise va­cancy pe­ri­ods, it’s vi­tal to en­sure your prop­erty is a prospec­tive ten­ant’s top pick.

Pre­sen­ta­tion is ev­ery­thing – good qual­ity pho­to­graphs, fresh paint and clean car­pets at­tract ten­ants, as do fea­tures such as air­con­di­tion­ing and a dish­washer.

It also pays to choose a prop­erty manager who is avail­able to show po­ten­tial ten­ants through your prop­erty at short no­tice and af­ter-hours, as ten­ants will of­ten go for the first prop­erty that ticks their boxes.

The old say­ing “lo­ca­tion, lo­ca­tion, lo­ca­tion” also rings true – prop­er­ties near trans­port, city hubs and life­style cen­tres al­ways fared bet­ter than prop­er­ties in less at­trac­tive lo­ca­tions.

“When times are good, even the poorly main­tained prop­er­ties in in­fe­rior lo­ca­tions get rented,” he ex­plained. “At other times, th­ese are the ones that sit va­cant,” Mr Heg­ney said.

But by far the most im­por­tant tool in pro­tect­ing your­self from ex­pen­sive va­can­cies is be­ing re­al­is­tic about your ex­pec­ta­tions – it of­ten makes more sense to se­cure ten­ants at a slightly lower rental rate than to have your prop­erty va­cant.

Seiz­ing op­por­tu­ni­ties THE huge up­side to the soft­en­ing in the rental mar­ket was that many suit­able in­vest­ment homes were on the mar­ket with re­al­is­tic prices, ac­cord­ing to Aussie Home Loans’ West­ern Australia manager Daniel Ganon.

Speak­ing at a prop­erty in­vest­ment think-tank in Perth this month, Mr Ganon said slow­ing pop­u­la­tion growth and higher hous­ing sup­ply had re­sulted in bet­ter prices for in­vestors.

“While WA is no longer the na­tion’s star prop­erty per­former, it doesn’t mean prop­erty in­vestors can’t find prof­its. There are bar­gains to be had among the in­creased sup­ply of hous­ing stock,” he said.

“The drop in min­ing in­vest­ment has re­moved pres­sure on prop­erty val­ues, cre­at­ing an ideal space for prop­erty in­vestors.”

Mr Ganon ad­vised in­vestors to take a longer-term view of the mar­ket and look at coastal life­style re­gions where there were higher lev­els of cap­i­tal growth.

Mr Heg­ney agreed that savvy in­vestors made their best moves when oth­ers were duck­ing for cover or “wait­ing to see”.

Gavin Heg­ney.

Daniel Ganon.

Peter White.

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