Thinking About Writing An Ebook About Property Investing In Australia

Hi guys, I am pondering on the idea of writing an ebook concerning about property investing in Australia, and would like to ask you the audience what would you like to see in a book as such. What topics would you like see being covered? There will be a price for the book I will be honest, and looking at charging around $9.99 per book, but I want to ensure that it covers the topics you want covered, and has quality information. In regards to when this book will be published I have not considered a time yet, as I said I am pondering on wether to write a book, but it also depends on what you want.

So feel free to e-mail me at gregcoglan@gmail.com, or leave a comment under this post for all to see.

RBA Drops Cash Rate Down To 2.75%

The RBA (Reserve Bank Of Australia) on the 7th May 2013 dropped the official cash rate to 2.75% a 53 year record low. In a statement, RBA governor Glenn Stevens said low inflation allowed the board to make a further reduction to boost economic growth. Compared to other developed countries such as the UK where the cash rate is .50%, and the USA the rate is 0.25%, the RBA still has plenty of room to move Australia's cash rate.

The housing and retail sectors are two of the key non-mining sectors that the RBA will expect to pick up some of the slack from the resources investment approaching its peak. Also the RBA intends to weaken the high Australian dollar, to help Australian manufacturing and export sectors.

When asked in an interview with billionare and Virgin CEO Sir Richard Branson about wether he had confidence in the Australian economy after the interest rate cut, he stated that he would swap the UK economy with the Australian economy anytime.

How To Get A Great Property Valuation

It can be very frustrating to have your home loan application knocked back or the loan amount reduced because the valuation came in too low. Here are a few ways in getting a good valuation.Investors frequently in Australia have their properties revalued in order to finance additional investments. For example, lets say your property’s value (equity) has gone up by $100,000. Most lenders will allow you to borrow around 80 per cent of that value (i.e. $80,000) which can be used as a deposit for another property purchase. In order to work out exactly how much lenders will give you, lenders will often send a valuer around to that property to assess the current value of the property. During valuations on my investment properties I have made it an objective to meet the valuer out at site and understand what he is doing. It is a good habit to get into as there are some things that you can highlight to the valuer (e.g clossness to public transportation) which can help with the valuation. Below are points from what industry experts such as Herron Todd White say on how to the get the highest property valuation.

Herron Todd White’s Phillip Grahame says, “The main things in a valuation are the size and functionality of the dwelling and the size and location of the land.” So obviously the chances of a favourable valuation mainly come down to your choice of property in the first place. And of course, it also depends on what the property market in general is doing at the time. Below are a number of things you can do to make sure you pull off the best valuation possible on the day:

1. Presentation
Presentation is the most important thing to take care of when you have an upcoming valuation. Ensure that the gardens are looking nice and the clutter throughout the house is cleaned up and all that sort of thing, because first impressions do count.

2. Recent sales evidence
If you know the sale prices achieved at any recent property sales in your area, have that information available for the property valuer.

3. A rates notice
From my own experience valuers like to see a copy of the property municipal/council rates. They varies from one place to the next, but there will generally be a “site value” or “unimproved land value” figure reflecting the value of the land only on the rate notice. And sometimes there will also be an “improved value”, based on the land and building. It gives the valuer a pretty good idea of where the property sitting in the marketplace for that area.

4. Outdoor living areas
Outdoor living areas tend to add more value than cost. So if there’s a well presented and functional living area, that always reflects well on a valuation.

5. Kitchen and bathroom
Kitchen and bathroom facilities help improve values. If they’re well presented and don’t have a dated look about them, then that will obviously have a positive impact on the valuation.

6. Make your improvements prior to the valuation
If you have home improvements to make, do them before the valuer comes around, as the improvements will help add value. However remember not to over capitalise on the improvements.

7. Clear instructions
If you’ve got plans for future improvements and got quotes and costings, make sure if you’re going through a lender that the lender requests an ‘as if complete’ valuation. This helps the valuer a lot as they have a true value on how much it each improvement cost.

8. List of recent improvements
If improvements have been made to the property over recent times, provide a detailed and written list of works conducted and the cost of these. Even better would be project specs and a building contract, giving the valuer an idea of exactly what has been spent.

9. Don’t over capitalise As I said before improvements and renovations add value, but be careful about over capitalising. For example: Putting on a large extension will obviously increase the value of the property but it may not increase the value more than what it actually cost. As a benchmark have a look what at neighbouring properties and see what improvements have been done.

10. Kitchen and bathroom
Kitchen and bathroom facilities help improve values. If they’re well presented and don’t have a dated look about them, then that will obviously have a positive impact on the valuation.

11. Be patient
Lastly, don’t ask the valuer what they think it’s worth just as they’re leaving. After visiting the property, the valuer needs to go away and undertake at least two separate methods for determining the property’s value. Two of the most common methods for residential property are “direct comparison” and “summation”. Direct comparison involves analysing recent sales of similar properties in the area. It may be a straight comparison, or a comparison of the rate per square metre (which is the sales price of each property divided by the land size..m2). In this method the valuer takes into account factors which differentiate your property from those in the comparison sample, such as location, size, quality of the dwelling and views. Using the summation approach, the valuer assesses the land value (sometimes based on a comparison of vacant land sales), and then includes the “added value” of the improvements on the land (i.e. buildings). The added value is based on market evidence and is sometimes analysed on a rate per square metre (m2)basis. The valuer probably won’t be comfortable giving you an answer until this analysis is complete.

In summary...
So in helping you get an optimal valuation on your property, keep the place neat and tidy, provide any information (e.g. improvement quotes, council rates) to the valuer which might support your case in why, and then leave them in peace to get on with their job.

Deducing Interest Rates During Tax Time

For most geared investors, interest is generally the largest deductible claimed against rental income, so it demands the most attention.

A ‘Negatively Geared Investment Property’ is when interest on a loan helps to produce a rental loss over a financial year.

This net rental loss is generally offset against the owner’s/landlord’s other income, reducing their payable tax, and may makes the investment property more attractive. Ensuring that interest can be claimed as a deductible is therefore critical.

Solutions that offer a faster reduction of a home loan balance while maximising deductions of interest on rental investments should be carefully scrutinised. In the case of ‘Split’ loans which in their various forms generally mean interest on the investment loan is capitalised, while all income including rent is directed towards reducing the home loan with its non-deductible interest expense.

This type of arrangement may be considered tax avoidance. Interest on the capitalised interest (interest charged on interest) may not be deductible (this depends on the ATO).

From my research here is a way if you are about to refinance or purchase a rental property on how to set up your loan arrangement so that you are likely to be in the best position to take advantage of any circumstances where the ATO concedes capitalised interest is deductible. No guarantees here but the following loan structure avoids most of the obvious traps though of course at this stage do not claim any capitalised interest without first obtaining an ATO ruling:

1)      Use all the available equity in your own home to secure a loan for the maximum amount you can. Use this loan to pay for the rental property. No doubt you will need more than that. The second loan can be secured by the investment property but this should leave available equity in the investment property to secure a line of credit should you later want to do so. This further reduces the link between the loan where the interest will be capitalised and your home. The ATO cannot argue that effectively you are not reducing the debt on your home but only shifting debt fromnon-deductible to deductible.

      2)      Do not have the home loan linked to other loans i.e. with a floating cap. It is fine to have a split facility with all your deductible debt but keep the home loan outside of this facility. 

      3)      Do not use a product that is marketed in any way for tax benefits.

Given the attitude of the Australian Taxation Office (ATO) – it is recommended that rental income be deposited into the rental investment loan account to cover the interest expense. When rent is less than interest and other expenses, using another loan, including a line of credit, is practical.

The interest on that component should be deductible. Where the line of credit is also used for private expenditure, keep detailed records to calculate the deductible portions of interest and to explain to the ATO in case of an audit.

Detailed documentation is also recommended when consolidating several small loans into one or two new loans on a re-structure or when borrowing more to finance a next investment after a positive revaluation.

I strongly suggest as always consulting your financial adviser or accountant see if negative gearing is ideal for your financial situation.

Reports Forecasting Property Recovery

According to PRDnationwide’s first 2013 Quarterly Economic and Property Report there is a belief that the property  market has strong fundamentals in place for an upswing in Australia.

PRDnationwide’s Index “ Time to Buy a Dwelling Index” is  showing a significant increase in New South Wales and Victoria and a marginal increase in Queensland. The indicator  measures consumer sentiment regarding whether it’s a good time to buy a property.

National Research Manager for PRDnationwide Aaron Maskrey, says the index is reversing a long-held trend which has been falling over the past decade.

The index has shown Queensland having only a marginal increase, however has the highest overall index score indicating that Queensland is where most buyers believe the time is right for an acquisition.

According to Maskrey There are more qualitative reasons for Queensland property buyers to be bullish too. “I was talking to some colleagues from Sydney and Melbourne. They believe the recovery is going to be led by southeast Queensland because it’s more affordable compared to other states.”

The report is optimistic about a stronger second half of the year in 2013 for the Australian economy as a whole.

Official Cash Rate Stays On Hold

Hi All. Been busy in the new year with a rental property of mine as I have been getting it ready for a new tenant. You might say there has been issues with the current tenants. The real estate market in Australia appears to be entering interesting grounds. I think from what I have been reading the market will still be stable and has movement to grow which has been spurred with low interest rates. Talking about interest rates, I would like to report about the official cash rate which was announced recently. For those who aren't aware of what happened in Australia and in regards to our cash rate please read on what I discovered.

After a meeting of the RBA (Reserve Bank Of Australia) on the 5^th Feb 2013 the official cash rate remains unchanged at three per cent following a meeting of the Reserve Bank of Australia (RBA) today. Inflation is consistent with the medium-term target, with both headline CPI (Consumer Price Index) and underlying measures at around 2.25 per cent on the latest reading.

Factors such as inflation being contained (within the usual 3% upper limit), optimistic economic news coming out of the United States, Europe and China and a more robust housing market within Australia, are likely to have contributed to the RBA Board’s decision. Growth within Australia was close to trend in 2012, led by very large increases in capital spending in the resources sector, while some other sectors (e.g. retail) experienced weaker conditions. 

The majority of economists had tipped today’s decision but remain confident of further interest rate reductions throughout the rest of 2013. Some analysts are predicting within 2013 total cuts of up to 100 basis points.

Paul Smith of “ Loan Market” says despite today’s decision, some lenders may toy with the idea of making their own movements with interest rates. 

“With the cost of funds pressure easing for many lenders, there’s an opportunity for them to make adjustments to their variable rates in attempts to attract new customers,” Smith says.

“The action or inaction from lenders in the following weeks could be indicative of what’s in store for interest rate movements over the next several months.”

However whether the big four banks (aka pillars) will pass on interest rate adjustments to the consumer is anyone’s guess.

Merry XMAS and a Happy New Year

To all my readers out there I wish you a Merry XMAS and a happy new year. I hope you have enjoyed reading the blogs I have posted as of to date, and I look forward bringing you new material in the new year to further expand your knowledge.