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Archive for April 2016

Gearing? What Is It?

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negative-gearing

There’s been a lot in the news recently about negative gearing, and concerns have been raised over proposed changes to the legislation. But if you’re new to investing, you may be wondering what exactly gearing is?

Gearing is the term given to borrowing money to invest – whether it’s in property or for other investment opportunities.

There are three types of gearing: positive, neutral and negative. The category your geared investment property falls into is determined by how much income your investment earns against how much the ongoing costs are and there are obviously pros and cons for each category.

Positive gearing

If investment costs are lower than the income received from the investment and you have an income, it is known as positive gearing. With a property investment, it means that the income from rent covers all your ongoing costs and there is some left over for you! But this income will have to be declared so you’ll need to set something aside for the tax office.

Neutral gearing

When all investment costs are the same as the income you receive from the investment, (ie your rental income is the same as your outgoings), it is known as neutral gearing. Some property investors prefer to neutrally gear their investment; although they don’t have an income from the property, they also don’t have to pay any tax because no profit was made.

Negative gearing

When earnings from an investment don’t cover all the investment costs, (ie the rental income is less than all outgoings), it is known as negative gearing. Negative gearing can give benefits for property investors by allowing them to offset the loss from the investment against other income, such as a salary. In other words, you have affectively reduced the total amount of income on which tax is calculated.

While there are tax benefits to be had from negative gearing, there are other risks which you need to consider, such as if the property is empty for a length of time or the interest rates rise very quickly.

Why is ‘negative gearing’ making headlines for property investors?

In Australia, one of the basic principles of tax is that necessary costs in earning income are generally tax deductible; currently the interest on a loan for an investment property is considered a necessary cost.

Other necessary costs for a property investment include maintenance, property management fees, strata fees and rates.

The proposed changes to negative gearing means interest would no longer be a tax deductible item, and this could affect some property investors depending on how they’ve geared their investment.

As with any investment, you are still responsible for the interest on the loan as well as the principal of the loan itself regardless of whether the investment is making a profit or loss. We strongly recommend you speak to a financial specialist so you can fully understand the financial implications and risks of positive, neutral and negative gearing for your situation.

Once you’ve decided on your budget, come to us. We can show you property investment opportunities in the Newcastle region and our experienced property management team can explain how our property management services can help.

KA APN

Archive for April 2016

Buying Off the Plan – What You Need to Know

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People-and-plans

There has been a lot of development in the Newcastle area and there is lots more planned. Buying off the plan can be a great opportunity for both home buyers and property investors alike. However, like everything, there are also some risks.

The Benefits

  • Longer Settlement Period
    This means you’ll have time to save more money, sort finance or even organise moving house.
  • Lower Price
    The property developer needs fast, early sales, so very often, the first properties off the plan are the best bargain.
  • Locking in a Price
    You’re paying for a property at today’s price but paying for it a year, or maybe two years later. If the property market experiences growth, your property will have increased in value by the time you come to move in.
  • Tax Benefits
    If you’re buying for an investment purpose you may be able to claim for depreciation on items like fixtures and fittings.
  • New Home Grant Scheme
    The scheme provides a grant of $5,000.00 towards the purchase of new homes, homes off the plan and vacant land on which a new home will be built. The value of the new home must not exceed $650,000.00 and the value of the vacant land must not exceed $450,000.00.
  • First Home Owner Grant (New Homes)
    The $10,000.00 First Home Owner Grant is available where the eligible transation is for the purchase or construction of a new home with the total value of the property no exceeding the cap amount of $750,000.00.
  • Buying Time on Stamp Duty
    This is payable on an off plan contract on the earlier completion or 15 months from the date of the contract for sale in NSW. With other contracts, you usually have to pay stamp duty on the earlier completion and 3 months after the contract is signed. Buying off the plan gives you extra time to increase savings or, for the savvy buyer, earn interest on the money set aside for stamp duty.
  • Builders Guarantee
    Newly built properties come with a 7-year builders guarantee. This means any structural or interior building faults which may occur in this time must be repaired by the builder.

The Risks

  • Bankruptcy
    Developers going into liquidation before the project is completed have been widely reported. Ensure you know what the options are if this occurs for getting your money back or what guarantees you have.
  • Expectations Not Met
    Unfortunately, some builders don’t deliver what they promise and the quality of work may not meet your expected standards.
  • Locking in a Price
    While we’ve mentioned this as a benefit, it can also be a risk if the property market falls in the time between signing the contract and completion date. While this isn’t so much of a problem if you’re intending to own the property long-term as the market will eventually pick up, it may be an issue if you’re securing finance for the full amount.

Our advice is always do your homework when buying off the plan.

  • Visit the property site and consider other constructions in the area that may affect your view.
  • Inspect the display home, models and plans and ask about fixtures, fittings and finishes.
  • Know the market conditions and research property prices in the area to ensure you’re not paying too much.
  • Research the developer – find out how long they have been in business and see if you can find out about their financial status. Also visit properties it’s already built to see the standard of work.
  • Make sure you know what you’re buying. Ask what is covered in the purchase price – are fittings, floor covering, painting and decorating also included?
  • Study the contract carefully and don’t be afraid to make additions such as guarantees of their financial status and what your expectations are.

It’s always advisable to have a property legal expert view the contract before you sign it.

If you’d like to know more about buying off the plan, or have any other property needs, our team would love to help. Give us a call on 02 4954 8833 or pop into our office.

FA APN

Archive for April 2016

Property Lingo Explained

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Definition of Real Estate

Do you know your Amortisation Period from your chattels? Or how about Caveat Emptor?

Every industry has its own terminology and lingo – and the property industry is no different. For the first time buyer, or property investor, some of the terms can take a bit of getting used to. We admit, the above examples are pretty extreme because most people know about mortgages (an Amortisation period is the length of time it takes to pay off your mortgage) and we usually refer to the owner’s belongs (such as furniture) rather than chattels.

Also usually use the phrase ‘buyer beware’ rather than the Latin Caveat Emptor.

Whether you’re looking to invest in property in the Newcastle area, or you’re after a new home in Cardiff, here is some property lingo explained:

ABSENTEE LANDLORD – An owner or sub-lessor who does not reside in the place or area in which he/she owns real estate from which he/she derives rental income.

APPRECIATION – An increase in value.

AUCTION AGENCY AGREEMENT – An agreement that the vendor must sign when a property is listed for auction. Details the reserve price and the costs of the auction, including advertising and the agent’s commission. Usually includes a condition that one agent will have the exclusive right to sell the property for a period during and after the auction. (See our top tips for buying at auction)

BUILDING LINE – The setback from the site boundary required by statutory authorities for buildings.

CERTIFICATE OF TITLE – A document issued under the Torrens System of Title, showing ownership and interest in a parcel of land.

COMPOUND INTEREST – Where interest is calculated on a sum that includes previous interest payments.

COOLING OFF PERIOD – A short statutory period after the contract is made, during which the purchaser may cancel the contract unconditionally. Usually does not apply in the case of auctions.

EASEMENT – A right to use the land of another (not involving the taking of any part of the natural produce of that land, or any part of its soil) or a right to prevent the owner of that land from using that land in a particular manner. Most commonly used where Government authorities have the right to run, for example, electrical mains or drainage through private property. Some form of compensation may be payable.

EFFECTIVE AGE – The age of an item, such as a building, as indicated by its physical condition and utility compared to its useful life, in contrast to its chronological age. The amount of maintenance and care given to the building will help determine its effective age. A 5-year old building may have an effective age of 10 years due to poor maintenance of the building.

EGRESS – The exit point from a property.

GEARING – See our article on Gearing

GUARANTOR – A person who undertakes to fulfil a contract if the main party defaults.

DEPOSIT – An amount given by a buyer to the estate agent acting for the seller. It shows the buyer’s serious commitment to the property and is commonly 10% of the purchase price.

LEASE TERM – The period of the lease.

NOTICE TO QUIT – A legal notice served on tenants requiring them to vacate real estate due to a breach of lease terms.

RIGHT OF ENTRY – Where a landlord may inspect the premises, provided reasonable notice is given to the tenant.

SETTLEMENT – This is the final stage of the sale when the purchaser completes the payment of the contract price to the vendor and takes legal possession of the property.

To see more property terms explained, you can download the list compiled by the Real Estate Institute of Australia (REIA)’s property glossary list: https://reia.asn.au/consumers/glossary-of-terms/

We always aim to explain everything in plain English, so don’t be afraid to ask if you don’t understand something. We’d love to see you in our office or hear from you on 02 4954 8833 to answer your questions and help you with your property needs.

* Taken from the list compiled by the Real Estate Institute of Australia (REIA). The REIA is the national professional association for Australia’s real estate sector. It is a politically non-aligned organisation that provides research and well-informed advice to the Federal Government, Opposition, professional members of the real estate sector, media and the public on a range of issues affecting the property market.

 

CA APN

 

Archive for April 2016

Where to Buy an Investment Property

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Landlords-–-Is-Your-Property-Adequately-Insured

One question we’re often asked by potential investors is which are the best suburbs to buy an investment property in. We could start listing some popular suburbs around Newcastle and Cardiff, or some of the areas being developed, however, we believe people live anywhere and there are always people who need to rent.

Potential investors very often overthink it. They are always looking for the right suburb and the right house – two years on, they’re still looking for the right suburb and the right house – meanwhile the market has moved on by 5%.

We think the key to a good investment property is to buy a good product. You don’t have to love the property as you’re not the one going to live in it, but you should like it; not many people want to live in a dark and dingy property overlooking a train track even if it is in a trendy area.

Here are our tip of what we deem makes a good product:

Easy to Maintain

Whether you’re using a property manager or managing it yourself, if the property has lots of maintenance issues it will cost you not just financially. Sorting maintenance is a drain on your time and can be stressful.

A structurally sound property with a small paved garden/yard, quality plumbing and air-conditioning/heating will be easier to maintain than a rambling old house with an overgrown garden.

Identify potential problems before you purchase a property. If they are relatively easy to rectify, and add value to the property, it might be worth investing in.

Rentability

Look for properties that will appeal to more than one segment of the rental market – singles, couples, young families or retirees.

Appealing features for many prospective tenants include off-road or secure parking, and proximity to shops, schools and public transport. A good layout is also attractive; people don’t like walking through bedrooms to get to the bathroom.

Unit or House

Both have different benefits and it basically comes down to your budget. Units are often cheaper and easier to maintain than houses, but there are other costs associated with units such as body corporate fees.

There is sometimes the scope for adding value to houses with further renovations and the extra room houses offer make them more appealing to family tenants.

Where to Buy

The reasons why some neighbourhoods are more desirable than others vary immensely and potential tenants will have different tick boxes. For instance, a family may be more interested in living in an area with desirable schools, while a working professional may be more interested in what entertainment is in the area and access to public transport.

Ultimately, most people want to live in a safe area with a low crime rate.

It’s always advisable to see if an area has any planned developments or zoning changes; these may affect property values and attractiveness to potential tenants in the future. For instance, an area where high growth is expected could offer the potential for better capital gains.

Our advice is, speak to finance professionals, know your budget, do your research, and make an investor property checklist. If a property comes on the market, weigh up the pros and cons – if it has more pros than cons, view it and if you like it, then consider putting an offer in.

If you have any queries or would like to know more about buying investment properties or our property management services our experienced team will be happy to help out.

Archive for April 2016

Introducing Andriessen Property Newcastle

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Picture1

www.apnewscastle.com.au

As one of Newcastle’s longest established real estate office, we believe in delivering outstanding service and creating new trends and practices in buying, selling, renting, strata and asset management.

Our whole philosophy is just to help people.

This is why we have gone back to our roots and we’re now operating as the independently owned family business Andriessen Property Newcastle. While we have had many happy years with the Professionals Group, we feel we will have more freedom to service our customers as we see best as an independent.

Exciting New Websites

Our unique flair and passion for property can be found on our exciting new website, www.apnewscastle.com.au. As well as listing our many residential and commercial properties for sale and to rent, we’ve also included lots of helpful information to help buyers, sellers and landlords alike.

Investors and tenants should check out our dedicated property management website www.newcastlepropertymanagement.com.au. From listing commercial and residential rental properties and giving tips to tenants looking for a rental property to offering practical information for landlords, this website has lots of information for anyone interested in any aspect of rental property.

People Behind Andriessen Property Newcastle

Craig Andriessen is at the helm of Andriessen Property Newcastle. Craig been bought up with real estate and as a licensed real estate agent, auctioneer, strata manager and business agent, Craig has worked with a diverse range of properties and managed numerous simple and complex sales. As well as overseeing the sales team and general operations, Craig will also be actively selling properties too.

Fred Andriessen, who founded the original Andriessen Property over 40 years ago, is still helping people realise their property dreams. He is the only agent in the Hunter region awarded the Diploma of Fellow of the Real Estate Institute of Australia. As the current President of Real Estate Employers Federation and the former President of the Real Estate Institute Newcastle Division, as well as been involved in various industry committees over the years, Fred is highly regarded in the industry.

Kellie Andriessen is heading up Newcastle Property Management. She started her career in our Property Management department in 1989 and with over 25 years of experience in the industry, you will be hard pushed to find a more experienced Property Manager.

The Andriessen Property Newcastle team is made up of 15 great people with a massive wealth of experience behind them, all committed to delivering an outstanding service and achieving great results. You can learn more about their skills and expertise by visiting www.apnewcastle.com.au/our-team

Our talented team is constantly looking for new and innovative ways to ensure your real estate experience is exceptional – this is why we continue to remain at the forefront of Newcastle’s property market.

However, we’re not just about property. As a family owned business, we love supporting our local community, and we are often involved in community events and fundraisers.

Whether it is buying or selling, renting or investing, we continue to be committed to delivering the best service and achieving the best possible results for our customers.

We are here to help, and we very much looking forward to helping you realise your real estate dreams.

As well as assisting you with your real estate needs, we’d love to hear your thoughts and views on our websites, so please get in touch!