If you are a property investor – here is how to increase your rental returns.

You’ve taken the plunge into the investment property pool and now have to find tenants. Although most rental markets throughout Australia remain tight, there’s still a need to put your property’s best foot forward to attract optimum returns.

Here are some of the ways you can add value and ask for more rent for your investment.

ADD OR UPGRADE APPLIANCES

If your rental has no dishwasher, add one. You can ask an extra $5-10 a week in rent and tick one of the big convenience boxes for renters.

European or stainless steel appliances in the kitchen can also add appeal, especially with the proliferation of would-be Masterchefs and My Kitchen Rulers.

LAUNDRY

If you have an older unit with no internal laundry, take a leaf from the Europeans and install a front-loader washing machine under a bench in the kitchen. You could also add a wall-mounted clothes dryer in the bathroom if there’s room, or install a retractable clothesline on a balcony. Expect to collect about $30 extra a week with internal laundry facilities.

TEMPERATURE CONTROL

You can charge $20-30 a week extra by installing an inexpensive, wall-mounted, reverse-cycle air-conditioner, especially if the property is in a very hot or cold climate. Tenants in hot climates will also appreciate – and pay a little extra for – ceiling fans if you don’t want to fork out for air-conditioning.

FURNITURE

Fully-furnished rentals do attract higher yields (from $80 upwards, depending on the property and area), but are not for everyone. Renters who are in transient professions (defence force, teaching), relocating long distances, leaving a relationship or moving out of home for the first time are more likely to target furnished rentals. Others may be put off if a place is furnished because it means their gear has to be stored.

Do your homework on the area and the type of renters it attracts before stocking up on extra couches.

UNDER-COVER PARKING

You don’t have to build a garage to provide protected parking. Consider building a carport over a driveway. A simple $5,000 carport will probably pay for itself through extra rent in around two years.

EYE FOR DETAIL

Glimpses of gleam can have a big visual impact, just as worn, rusty and scratched fixtures can detract. Modernise older properties with small details, such as new handles on drawers and cabinets, more contemporary light fittings and sparkling stainless steel taps. You can also give a stale bathroom a quick and cheap facelift with new towel rods and hooks, a large mirror and a new shower screen. These little features are hygiene factors that will attract a higher-paying tenant.

STORAGE

Built-in wardrobes are highly sought, so make sure you have them in every bedroom. They not only attract extra rent, but broaden the appeal of your property. You can also add storage by reconfiguring existing wardrobes and kitchen cabinets.

Think about outdoor storage too, such as a shed or garage shelving, as tenants are likely to have bicycles, sports gear or camping equipment to stow.

SECURITY

Insurance statistics show renters are twice as likely as owner occupiers to be burgled, often because security is not as stringent. Make your place less appealing to burglars and more enticing to renters by installing security screens on doors and windows. Just ensure you don’t bar windows, as they can pose a safety hazard in the case of fire.

REDUCE ENERGY COSTS

Tenants are often prepared to pay a little more in rent to save a lot on their utilities. Replace all standard light bulbs with energy efficient ones and switch the old electrical hot water system for a solar-boosted one. Make sure you promote the property’s energy efficiency when advertising for tenants.

Read this before you sign on the dotted line:

Have you been asked to act as guarantor for your child or another family member? Before you whip out a pen and sign the contracts, you need to hear Wendy’s story.

Wendy is in her mid- sixties, and lives in Perth with her son. She has a granny flat at the rear of her son’s property where she stays with her two dogs, Millie and Ellie.

A few years ago, Wendy was living in a three bedroom house that she originally purchased with her late husband Jo, who passed away a long time ago. She didn’t have a mortgage anymore, and she was looking forward to taking it easy in her retirement.

When Wendy’s daughter came to visit one day, she had an important question to ask. She was looking to purchase her first home, but the bank wouldn’t grant approval because she had only been in her job for a few months. Liz wanted her mum to act as guarantor on the loan to help her get across the line.

Of course, Wendy wanted to help her daughter, and after she spoke to a few friends she found that it was a fairly common practice to do this favour for one’s child. Without giving it too much thought, Wendy decided to sign the contracts that the mortgage broker had drawn up.

On the day that Liz settled on her home, Wendy dropped around with a bottle of champagne to help her celebrate this exciting new step. There was a lot of unpacking to be done, but her daughter had never looked happier.

Six months later, everything had changed. Liz was suddenly made redundant and lost her job. Her boyfriend had also ended their relationship a couple of weeks earlier, and she began to suffer from severe depression. The mortgage went unpaid for several months, and when Liz avoided contact with her lender, the house was taken by the bank and sold.

In the time that all of this was happening, property values had decreased slightly in the area, and due to the need for a quick sale, the property was sold for $80k less than what Liz originally paid. After the sale was finalised, the bank was not able to recoup all of their funds, so they focussed their attention on Liz’s guarantor.

Wendy had been under the impression that she might have to pay some of the missed instalments on her daughter’s behalf. She didn’t realise that the bank could demand that she pay the difference between the sale price and the loan amount. When Wendy didn’t have the $70k that the bank were asking for, they sold her house from under her.

This sort of scenario is more common than you might think. Parents naturally want to help their children succeed in the world, but it’s very important to understand what you’re agreeing to if your child asks you to act as guarantor. If you don’t understand the contracts, make sure you get a solicitor to investigate for you.

Remember too – there’s always another way of doing things, and sometimes a cash gift can be a better option. Or better yet, your child might need to wait until they are financially able to make the leap into home ownership.

6 Steps you can take today to achieve your financial goals

Are you struggling to manage your household expenses, mortgage repayments and other unexpected bills that always seem to arrive at the wrong time? It might be time for you to sit down and create a budget that works for you.

Many homeowners have achieved their financial goals a lot sooner by creating and following a careful budget. Who knows – you might even be able to pay a little more off your mortgage each month and be mortgage free a couple of years sooner.

Step 1 – Identify how you’re spending money now

Get out the bank statements, receipts and online banking, and spend some time examining exactly what you spend money on now. Be honest, and don’t forget to factor in the things that only come up on occasion – like car registration, birthday presents, Christmas etc.

Step 2 – Set goals for the future

Work out what you hope to achieve by implementing your budget. This will help to motivate you because you will be working towards an actual goal and you can see the results.

Step 3 – Use budgeting software or other methods for monitoring spending

There are some incredible programs available now for budgeting, accounting and monitoring spending. Many of these can be synced with your internet banking so that they automatically collate the information for you.

Step 4 – Leave room for the occasional unscheduled purchase

There’s no use creating a strict budget if you can’t stick to it. If you currently go out for dinner once a week, rather than removing it altogether, try budgeting for dinner out once a month. If you don’t feel like your life has come to an end, you’re more likely to stick to the budget and achieve your goals.

Step 5 – Watch out for disappearing notes

Do $20 notes seem to grow legs and walk out of your wallet whenever you stop at the ATM? If you don’t need to withdraw cash then try to avoid it. Most outlets have EFTPOS facilities these days, so try using your card for small purchases, rather than withdrawing money and making it disappear.

Step 6 – Don’t count on uncertain wins

Don’t spend money that you can’t afford, because you think that you might be getting a tax return this year. It’s dangerous to rely on any money that isn’t guaranteed when you create your budget. Maybe you could wait until you actually receive the money and then do something really special with it once you have it.

Do you have the right things covered?

It’s funny how most of us insure the simple and basic things that can easily be replaced – like our car and the contents of our home.

However, not many of us cover the most important things- like our health and income.

These statistics outline how 75% of us will be diagnosed with a serious illness during our working life, yet nearly all of us are under insured when it comes to protecting our life and income.

Regardless of whether you rent, have a home and mortgage or are paying off an investment property, its important to protect your income in the event of unforeseen circumstances.

Please read my short factsheet – Do you have the right things covered?

https://www.mortgageaustralia.com.au/email/files/doyouhavetherightthingscovered.pdf

For many Australians retirement is an opportunity to down-size their homes and simplify their lives. For more than 138,000 retirees*, that means opting for life in a retirement village.

Village living offers an appealing lifestyle, especially for those looking for a sense of community and to spend their new-found free time on recreation rather than maintaining a property.

But the process of taking up a spot in a retirement complex is very different to buying your own home. Haven takes a look at some of the pros and cons of shifting to a retirement village.

Not an investment decision

Retirees need to consider a retirement complex to be a lifestyle choice, not an investment decision. Rather than buying a physical appreciating asset, you are entering a contract to occupy a place in the village for an entry fee.

There are usually three types of contracts:

Strata title: You pay an agreed amount to a former resident or the operator, and then own the unit. You also usually need to enter into a service agreement with the operator.

Loan and licence: May be offered by not-for-profit organisations, such as churches. You usually pay a contribution in the form of an interest-free loan.

Leasehold: The lease is usually registered on the title deed, which protects you if the village is sold. You pay a lump sum for the leasehold.

Entry, ongoing and exit fees usually apply to all three contract types.

Rather than a sale price, you pay an entry fee, which varies greatly depending on the location of the complex and the amenities and services offered. On average, the entry fee for a two-bedroom unit is about 90 per cent of the median property price for the location.

You will also be charged ongoing service fees to cover the upkeep of amenities in the village, such as swimming pools, gardens, recreation areas and communal transport.

Don?t enter into any agreement without the advice of a specialist retirement lawyer. They can help you understand the fine print and guide you through the system based on your state laws.

Age pension

Your retirement advisor will also help you navigate your age pension eligibility. The amount you pay as an entry fee to a retirement village can affect whether you are classified as a homeowner for pension purposes or a non-homeowner.

It depends whether the entry contribution is higher than the extra allowable amount (EAA), as determined by Centrelink. The EAA is the difference between the non-homeowner and homeowner assets test threshold for the age pension at the time the entry contribution is paid.

The extra allowable amount is currently $146,500. Whether you are considered a homeowner affects the amount of assets you can own without impacting your pension entitlement.

If you are not considered a homeowner, your entry contribution is included as an asset, but it is not classed as a financial investment and won?t be considered as a source of income. You may also be eligible for rental assistance.

Shop around

Just like when you buy a property, you should do your homework before settling on a retirement village. Take a tour and talk to residents about what they like and dislike about the place. Think about what you want out of your retirement and whether the complex caters to those needs.

– If you want to entertain, do you have space in your unit or is there a communal area you can use?
– Is there a gym or swimming pool where you can exercise?
– Can you have guests stay over and, if so, for how long?

This can be a key consideration for grandparents who may take care of grandchildren. You should also ask about transport help. Many complexes provide a private bus service to shops and clubs for residents who don?t wish to drive.

Generally, the more comprehensive the services the more you pay in body corporate fees, so make sure you understand the fee structure and what?s included before signing on the dotted line.

Community spirit

One of the biggest attractions of retirement living is the instant community. Many villages provide social opportunities ranging from outings to quiz nights, dinners and interest clubs. Participation is entirely optional but there is usually no shortage of opportunities to get to know and socialise with your neighbours.

Aged care included

Many retirees plan ahead and scout out a village with an on-site aged care facility to avoid another relocation in their latter years. Just be mindful the level of care someone needs is determined by an Aged Care Assessment Team and that not all facilities offer high care should you or your partner require it.

A place in aged care may also require separate payments, or entry fee, and many facilities will have waiting lists. It?s also common for one partner to have greater needs than another, so couples with health or mobility issues need to ensure the complex they settle on caters to their needs.

When you leave

When a resident moves out, it is generally because they have passed away or relocated to an aged care facility. Financially, it is usually the beneficiaries of the resident?s estate who are most impacted.

When a resident sells up they, or their estate, are generally charged an exit fee, or a deferred management fee, which is usually charged annually at 2.5 to 3.5% of the original sale price, capped at 10 years.

Some complexes may also require a percentage of any capital gains made. Make sure you read the fine print of the original sale contract and seek advice from a specialist retirement lawyer.

*Retirement Villages Association Retirement Living Survey 2011

If you are thinking of buying – start your research with a Free Suburb Profile report.

Australian consumers have grown to be exceptionally educated when it comes to researching the property market.

Not a day goes by when there isn’t an article in the media reporting some aspect of the property market.

Information providers like MyRP Data make researching the local marketplace much easier for the average buyer, seller or investor.

Visit www.myrp.com.au/n/free-suburb-profile/myrp-545 for a free suburb profile report.

Please also download this guide for more details.

https://www.mortgageaustralia.com.au/email/files/savvypropertypurchasing-freerpdatasuburbreport.pdf

Are a few unfamiliar words stopping you from building wealth?

Are you thinking about dipping your foot in with property investment, but don’t really know where to start? There is a lot of information out there, but many first-time investors become overwhelmed by all the technical stuff.

Don’t panic though – here is a list of some of the most common phrases to do with property investment – and they have been de-mystified for you.

Capital gain

Capital gain occurs when the property increases in value, over and above what you paid for it, and what you have spent on repayments, improvements and additional costs.

So if you purchased a property for $200,000, and you spent $40,000 on improvements, and $50,000 on repayments – then you sold the property for $350,000, your gross capital gain would be $60,000.

Equity

Equity is the difference between what you owe on your loan, and how much your property is worth. You can build equity by investing in property that is likely to increase in value, while you work to reduce your loan amount.

If you purchase a property for $300,000 and you put down a $30,000 deposit you would owe $270,000. Therefore you have $30,000 equity in the property.

Investment Strategy

Your investment strategy is the plan that you make, taking into account your financial goals. Are you looking for a way to get a quick win – and only plan to focus on short term gain? Or are you looking to build an investment portfolio over a number of years or decades?

This could be something to discuss with your accountant or financial planner, as well as your mortgage broker.

Interest only loans

Interest only loans allow you to borrow money and only repay the interest for a specific period of time. Usually the interest only period lasts from 1 to 5 years.

These loans are helpful if you’re focussing on short term gain, and plan to sell the property within the first few years.

Introductory rate loans

‘Honeymoon rate’ loans offer a lower interest rate for a short period at the beginning of the loan, before you return to standard variable interest rates.

These loans can be attractive for owner builders, or those planning to achieve a short term gain on their investment. The lower repayments mean that you could pay more off your loan balance in the short term.

Line of credit

A line of credit is a pre-approved amount of money that you can borrow when you need it – either as a lump sum or in small portions.

This option is popular with experienced investors, who are always on the lookout for their next property purchase, and need to be able to move quickly.

Redraw facility

A redraw facility allows you to make extra repayments against your loan, and then take the money back later if you need it. This is a great feature for people buying and selling multiple investment properties.

All in one accounts

All in one accounts are designed so that all of your income goes to the one place, and the account is used for your loan as well as all of your expenses.

Because everything goes into this account, the amount that you owe will be reduced. Be sure to look into all of the fees involved with this option.

Offset account

An offset account is a savings account linked with your loan which reduces the interest you pay. Your lender will take your savings into account and deduct this figure from what you owe before calculating your interest.

Construction loans

If you’re building a home and you don’t need to borrow the full amount upfront, a construction loan allows you to only pay interest on the amount that you have spent.

Bridging finance

Bridging finance is designed to help you purchase one property before you sell the other. Once you sell the old property, the funds are paid straight into the loan for the new property.

The danger here is, if you don’t sell the old property as quickly as you thought, you will be responsible for servicing a much larger loan.

Of course, there’s so much more to think about when you start looking for an investment property. But armed with some of the lingo – you will be an expert in no time.

Revealed – the secrets to buying property with confidence

If you are worried about rates rising – a Split Loan may be a good choice.

I have been receiving many enquiries this month as a result of the last RBA announcement and movement of interest rates.

It’s a very confusing time for our clients at the moment and their biggest question right now is should I fix my loan or not?

Some clients are choosing to set up a split loan facility.

This means that you can fix a portion of your loan and leave the rest of the loan on a variable interest rate.

This provides more flexibility than fixing your whole loan while at the same time gives you some peace of mind that a portion of you loan repayments will be at a regular and predicted amount each month.

If you want a quick look to see what your payments might look like using this facility, please check our split loan calculator on our website and then call me if you are interested in further discussions.

I am here to help you achieve your best financial outcome so please call at anytime for help or more information.