what should you know before -...

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What should you know

BEFORE you start investingin property?

Disclaimer: This article is generic in nature. All finance and investment decisions should be considered

wisely and based on your personal and financial circumstances. Seek proper advice before committing to any course of investment action. This is not deemed as advice.

We recently chatted to a client who has been investing in residential property for over 25 years. We asked her “What do you know NOW that you wish you knew BEFORE you started investing?” In fact she listed over 20 tips! We thought we would share with you her top seven insights... 1. Know the value of education Firstly, she wishes she had access to the finance information now available! That’s the reason we love to share our finance tips and articles with you. Our aim is to help you navigate every financial stage of life with usable, educational information. Being financially savvy not only underpins our own future, it allows us to pass on important knowledge to our kids. 2. Be careful who you listen to (including family, friends, bank tellers, accountants and real estate agents). Many successful investors may never have taken that step if they had listened to the naysayers. If they don’t have more properties than you, then find someone who does. Find your team of experts, research and ask questions. If you are learning something new from them they could be the right person! 3. I wish I had started sooner We all know our first property is the hardest - you have to make sacrifices. Our client lived on bread and tinned soup, worked 3 jobs during university studies and worked weekends (while her friends were out spending THEIR cash). Time and property prices don’t wait for anyone. 4. I wish I’d bought an investment property before my home Purchasing an investment property first (while living with parents, family or

renting with friends) may allow you to get into the market earlier than saving for a deposit for your first home. The rental income and the tax man will help pay off your investment property mortgage. This path isn’t for everyone but if you’d like to explore your options we’re here to assist. 5. Location. Be careful where you buy... If you’re not highly educated about investing in property you can make big mistakes. As a rule of thumb you should stick to good old fashioned location guidelines such as:

• growing capital cities

• confirmed future infrastructure and transport plans

• favourable supply and demand statistics

Choosing the right location is crucial for future capital growth. 6. Pay the LMI to get your foot in the door If lenders’ mortgage insurance (LMI) will help you get into the market earlier with a smaller deposit it could be worth crunching the numbers. If property prices increase during the time you take to save the additional deposit the price increase will likely be far greater than the LMI you are asked to pay now. It’s worth a discussion with us. 7. Take out landlord insurance Landlord insurance covers crucial items for investment property owners that may not be covered by other types of home and contents policies, eg theft, malicious damage or vandalism by tenants or their guests or loss of rent due to tenant default.

If you have a mortgage on the property your lender may require you to take out insurance before you take on tenants. Speak to us! Lastly, make sure you find a brilliant finance specialist - like us - who understands property structuring and finance. We work with you to understand your long term financial goals and the structure suitable for your individual circumstances. Please be aware however, this article is a personal opinion and NOT advice for you. Everyone’s situation is different. Please read our disclaimer below. It is always important to speak to us BEFORE ACTING on anything you read about financing an investment property.

With a generation of baby boomers entering retirement there is no end of information on downsizing a home. On the other hand, for a generation of homeowners with entirely different needs what do YOU need to know when it comes to upsizing your home? Common reasons for upsizing Chances are you’ve been perfectly happy in your first little house or apartment, but life changes - along with our living requirements. Reasons for upsizing may include:

• marriage • having children • a growing or blended family • starting a home business• additional family moving in• buying a larger property while

keeping the first as an investment• windfall/inheritance

Before you start... Moving on to a new stage of life can be both exciting AND scary. The most important task is to define your goals and do your homework BEFORE you proceed. Key points you should consider are: Long term goals What are your future plans in terms of lifestyle, kids’ schooling, additional children, potential investment or financial return?

When choosing the size, type and location of a property, asking yourself these questions will help you define the right property for both now and in the future. Borrowing power We can help you determine your current equity and potential borrowing capacity for your individual circumstances. If you haven’t had a property valuation for a while it’s possible that during that time, capital growth or renovations have resulted in equity you didn’t realise you had! Ask us for a property report for your area!

If you require a valuation we can assist you with a referral to our property valuation specialist to determine what potential equity you may have. Additional costs Of course a larger home will also translate into increased costs. Just some of the costs that should be factored into your financial considerations are:

• Maintenance costs - lawns, gardens, painting etc. Swimming pool? Make sure you add pool maintenance!

• Utilities - include transfer costs, plus heating and cooling a bigger space will probably mean larger ongoing utility bills.

• Property taxes - council rates will most likely increase. Don’t forget stamp duty either - this is often a significant cost in

a property purchase. Land tax may also be applicable.

• Home insurance - home insurance premiums will increase exponentially with the value of your new property.

• Furnishings - with more rooms to fill you may need to factor in not only more furnishings, fixtures and appliances but home and contents insurance will also need to be reviewed.

• Renovations - are renovations part of the plan in order to ensure your new ‘dream home’ matches your dream?

Research and consideration of all possible costs involved in upsizing your property will help you move forward with confidence. As your finance specialist it is our role to help you explore finance and structure options most suitable to your individual circumstances and your future financial goals. Getting ready! So… you’ve explored your financial options and you’re almost ready to take the leap. What’s next? Now is the perfect time to start preparing for your big move, especially if you’re contemplating listing your current property for sale (or lease) in the next peak selling/buying season… Decluttering This can be both necessary and cathartic but remember you will also be filling a larger space. Assess items on usefulness - no point in tossing it only to have to buy a replacement! Start packing and storing now - not only will you declutter your home ready for market you’ll also be ahead of the game come moving time! Painting and repairs Ideally, you will only want to spend as much as is necessary to ensure or improve the market appeal of your property. Seek guidance from our experts with knowledge of similar properties. If upsizing your property is on your wish list this year then call the office and we would be pleased to book you in for a chat!

Is upsizing on your wish list?

*Disclaimer: This article is generic in nature. All investment decisions should be considered wisely and based on your personal and financial circumstances. Seek proper advice before committing to any course of investment action. This is not deemed as advice.

Ask us for our ‘Property buying checklist’ to itemise and keep track of the features of each property you’ve seen!

Many property owners sell their existing property to purchase a new property at some point in their lives. In a perfect world, the sale of one and purchase of the other will happen in a smooth, seamless sequence. In reality it doesn’t always happen like that! What are your options if you find the perfect property and your current property is still waiting for a buyer? Perhaps you believe you can’t buy without selling but you don’t want to miss out on your dream home? One option you may have heard about is bridging finance. What is bridging finance? Bridging finance can be used to ‘bridge the gap’ between the purchase of your new home and sale of your current home. The size of the bridging loan is calculated by adding the value of your new home loan onto your existing outstanding mortgage less the predicted sale price of your existing home. This is referred to as the ongoing balance. Bridging finance is typically an interest only loan with a limited loan term. As you are essentially carrying two loans at once a bridging loan isn’t for everyone - it is imperative you seek expert advice. As your finance specialist we can explore whether this finance type is suitable for your individual circumstances and financial situation. What you should know…• You generally require a

minimum of 50% equity in your current property to avoid a high interest rate.

• Careful analysis of possible price fluctuations, auction clearance rates, general market conditions and selling seasons is essential.

• As an interest only loan, interest is compounded monthly on the ongoing balance at the standard variable rate. The final interest bill will be added to the mortgage on your new home when you sell your existing home.

• A maximum loan term will apply.

• There are generally restrictions on this type of purchase, eg not suitable for construction loans, strata title or company purchases.

• When your existing home is sold the bridging loan is converted to a regular principal and interest home loan for your new home. You then commence making repayments into your new home loan.

• Costs and fees should be considered. Upfront costs of buying your new home, eg stamp duty, pest and building inspection and legal fees, can usually be added to the bridging loan.

Traditionally, interest rates have been higher for bridging finance due to a greater element of risk. There are some lenders offering products at standard variable rates depending on your individual circumstances. Risk factors of bridging finance One of the biggest risks with this loan type is overestimating the eventual sale price of your existing home. Should market conditions shift during the loan term and there is a shortfall when paying out the bridging loan it could cost you dearly.

Advantages of bridging finance:

• Allows you to buy a new property before your current property sells.

• Avoids rental costs between selling existing property and buying your new home.

• Usually only repayments on current mortgage balance are made during bridging period.

Disadvantages of bridging finance:

• You may require two property valuations resulting in two sets of valuation fees.

• If your existing home doesn’t sell within the loan term you will usually be charged a higher interest rate.

• The longer it takes to sell your existing home the higher the final interest bill.

• If your current lender does not offer a bridging loan they may impose early exit fees if you choose an alternate lender. Analysis of all fees and costs applicable will be part of our assessment of the most suitable loan product for your situation.

Of course, it’s always worth investigating whether you are in a position to buy a new property AND keep your original property as an investment. If you HAVEN’T explored the current equity in your home for a while then make sure you call us BEFORE you make any future property buying decisions. We are always here to help you on the path to future wealth creation!

Selling and buying...

Do you need to BRIDGE THE GAP?


Contact us to book in for a chat about your finance options.

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If you know people in your life who you would like to

encourage to save more, feel free to contact the office for a copy of this article for you to send to them. Good luck with your savings goals this year.

A goal without a plan is just a wish!

Research¹ shows about 57% of Australian adults are savers although only 16% of those manage to save quite easily. When many of us feel burdened by the mere cost of ‘living’ it is often difficult to establish a savings plan. However, creating a savings habit can play an important role in our ultimate financial future. So what are some of the key tips for becoming a successful saver? We often convince ourselves to spend money on things we simply don’t need. Becoming a good saver is a game of psychology – it requires awareness of the unconscious triggers that prevent us from keeping our money in the bank. Creating certain habits can help combat the impulsive and seemingly innocuous behaviours that cause us to overspend. We encourage you and your family to try our six tips:

1. Aim to be above average! Firstly you need a savings goal!

What are you saving for? Having a specific goal helps you stay more focused on the path to getting there. However…

Research2 shows the average Australian saves $427 per month with the national average about 12% of disposable income. If you’re not already doing so think about how you could live with $400-$500 less per month to become at least the average? 2. You need a budget Creating a budget and deciding how much needs to be allocated to savings can change the way you view the money you have available to spend.

When you evaluate how much money you have ALLOWED yourself to spend on items you treated nonchalantly you’ll possibly reconsider a lot of purchases you previously thought were necessary. 3. Automate! Find ways to automate as many transactions as possible including direct deposits, automatic transfers from one account to another and automatic bill pay.

By creating automatic transactions you relieve the burden of making sure regular payments happen each month and you’re less likely to break the saving habits you created when you formulated your budget. 4. Set incremental savings goals... Decide some savings goals that are both short and long term. Without goals it becomes easier to lose interest and fall back into bad spending habits. Like most tasks, the immediate excitement of starting a new project can quickly become mundane without motivation. Keep yourself inspired with smaller milestone goals so you can celebrate with a small reward as you tick off each one. 5. Focus on gains - not losses Seeing your savings grow can often lead to more happiness. Believe it or not, many people find as much pleasure from saving as spending money! It can dramatically change the way you perceive your finances. However, when you’re saving and money is tight it CAN lead to frustration when you see an item you’d really love. You may find yourself questioning the value of saving when an item that will ‘make you happy’ is right there! Avoid viewing your inability to purchase a flashy new item as a loss. Do you REALLY need it or is your money better off in the bank? 6. Avoid impulse buying! Always prepare a shopping list and STICK TO IT. You might do this for groceries but you should apply the same principle to every shopping outing.

Most shop layouts are created to maximise impulse buying. Creating a list of the items you need avoids the aimless wandering that may see you purchasing unnecessarily. Try to use cash and NOT credit cards. It is well documented that we tend to spend less when we have to hand over cash instead of swiping a card.

Are you a successful saver? Try our six saving tips!

When we calculate how much we have to spend beforehand we are more likely to stick to our limit. Developing achievable saving and spending habits will see you more ready to combat almost any impulse spending you may have. Those who have been around a while will tell you… ultimately, immediate gratification is never as satisfying as the longer term realisation of your goals.

1. MoneySmart brand tracking program, Sweeney Research January 2014 2. suncorp.com.au


The cost of pets… Are you patting YOUR DEPOSIT?

to help you with your savings goal

Ask us for our ‘Budget planner’


If you are one of the 3 in 5 Australian households who owns a pet you probably won’t be surprised to know Aussies spent $12.2 billion dollars on pet products in 20161. That’s a lot of money that could be used elsewhere. So how do we manage the cost of owning our furry friends? The main reasons many love to have pets are:

• companionship

• teaching kids responsibility

• relaxation and

• security

The main reasons some of us DON’T choose to have pets are:

• home or lifestyle not suitable

• cost

• body corporate rules or

• we don’t want the responsibility

The positives of pet ownership There is no doubt our Aussie lifestyle and climate is perfect for a pet-loving nation. In fact we have one of the highest rates of pet ownership in the world. Research2 also shows there are various health benefits that may be associated with pet ownership including:

• increased cardiovascular health

• more physical activity (especially dog owners)

• fewer visits to the doctor

• strengthened immune system and reduced risk of allergies (when growing up with a dog)

Research has also shown owning a pet can have psychological benefits including:

• children who own pets seem more empathetic and have higher self esteem

• teenagers with pets have a more positive outlook on life and show fewer signs of loneliness, despair and boredom

• enhanced social connectedness and social skills

In a digital world rife with bullying it’s good to hear pets have a positive effect on kids and teens. Pet owners generally report less depression and appear to cope with grief, stress and loss better than those who don’t own pets. The role of pets in the lives of the elderly has been proven to have a positive effect for those in nursing homes or assisted care. The cost of owning pets Before embarking on pet ownership it’s important to factor the cost into your household budget. Many of us may have been caught off guard when that cute puppy or kitten translated into many hundreds of dollars in food, care and vet bills each year. Perhaps even new fencing? One client recently took her cat to the vet and ended up with a $1,000 bill. Ouch! Research shows the average cost of owning a pet is $1,475 pa per dog and $1,029 pa per cat1 - not including unexpected costs. The cheapest pet? A goldfish comes in at around $50 pa.

Based on these figures a household with a dog and a cat could spend $25,000+ over their lifespan! Budgeting for our furry friends Depending on the breed or source of your pet your initial purchase cost alone could be between $200 and $3,500+. The average ongoing costs per annum per dog are: food ($622), vet care ($397), health products ($248), grooming ($129) and boarding ($86)1. Estimating your costs, allocating these in your budget and exploring where you can save on other expenses to compensate for your furry friend will help ensure your beloved pet does not result in a cost blowout. The role of pet insurance As medical technology and level of veterinary care advance, so too has the cost of treatments. Sadly, an unexpected illness or injury could result in the heartbreaking decision to have a pet euthanised if the cost of treatment is simply unaffordable. Pet insurance is a growing industry with a number of providers. In 2016 about 25% of dog owners and 20% of cat owners had pet insurance at an average annual cost less than $3001. As with all insurances it pays to do your research and know the terms and conditions of the policy. It is not always available for older pets and may not cover routine visits such as vaccinations, dental and desexing. Premiums could also be higher for certain breeds. Need help with your family budget? We’re always here to assist. Being prepared for the cost of owning our beloved pets will ensure we enjoy them for many years.1. Pet ownership survey 2016 (Animal Medicines Australia) 2. kb.rspca.org.au

Your detailsYour detailsWe need your contact details in case you are the winner! Good luck!Your name:

Phone:

Address:

Email:

Tick if you’re interested in knowing more about (topic sheets available): o How much power is in your equity? Ask us…

o Drowning in credit card debt? Find out how to CRUSH it!

o Want to buy your first home? Let us help you step through the door…

o Underinsured? What’s the worst that could happen? Refer your family and friends to receive more entries!

Their name:

Phone:

Email: This competition commences at 9am AEDT on Friday 1 December 2017 and closes at 5pm AEST on Wednesday 25 April 2018. The winner will be drawn at 12 noon AEST on Friday 27 April 2018. Authorised under NSW Permit Number LTPS/17/18689; ACT Permit No ACT TP 17/02089; SA Licence No: T17/1960. Please contact the office if you would like a copy of the terms and conditions of this competition.

How to enterHow to enter• Online using your personalised URL on the front cover,• Post this entry form to our office,• Email us with your contact details and subject line ‘Ultimate

Holiday’, or• SMS ‘Ultimate Holiday’ with your contact details.

Do you know anyone who would love to win a $10,000 Ultimate Holiday Package? Encourage them to enter and you will receive an additional entry.

How to get additional entriesHow to get additional entries You will receive additional entries by referring your colleagues, family and friends. Enter using any of the above methods. Make sure you include your details AND the details of the person you are referring so we can reward you with an additional entry.

By the way, please feel comfortable about entering this amazing competition because we DO NOT and WILL NOT rent or sell your details to any third party. Promise! We just want to give you and your friends the opportunity to win a fantastic holiday!

The prize winner will receive a $10,000 Ultimate Holiday Package comprising a $7,500 travel voucher towards a holiday of their choice PLUS $2,500 in cash to a maximum total value of $10,000.

The prize includes: a $7,500 travel voucher towards a holiday of your choice PLUS $2,500 in cash

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