Overview of Australia’s Current Property Investment Landscape, 2020

Housing is often considered the most important asset by the majority of Australians. In the country, housing is one of the largest components of wealth. As consumer trust increases in the real estate industry after the COVID crisis, we’ve seen small yet impactful changes that determine the future of housing and real estate investment. In this article, you’ll read some of the important trends that we have identified over the course of the year.

The Housing Market Has Remained Stable Despite Grim Forecasts
We’ve probably heard about the previous predictions of an incoming property market crash and significant declines. But, fast forward, September the declines have not been as steep as first predicted. In fact, more investors are confident than fearful of the long-term stability of the industry.

Despite saying this, we also don’t claim that all markets are stable. There have been markets that were seriously affected. For example, Sydney’s eastern suburbs where vacancy increased by 2.5 percent in February and 5.2 percent in June. In contrast, Liverpool remained stable despite the lack of tourists. Its vacancy remains unchanged at 2.7 percent.

Australian economic and property report also found that the Australian market has managed to hold its value. This is despite earlier predictions that prices could significantly plummet down to almost 30% due to COVID-19. After the drought, bushfires, and then the pandemic, the property market remained strong and when compared over the years, it even managed to recover in 2020.

We believe that housing remains important to people despite the crisis. Businesses may have decided to let go of their large office spaces in replace of smaller ones. However, people are still looking for residential properties and the demand hasn’t gone down. Overall, investors are confident that the property market will be resilient until the end of the year. We’re yet to see steep price falls, and it’s nowhere as horrible as per the previous forecasts.

House Prices Aren’t Falling
Stimulus from the government is also helping people keep up with their mortgages. Furthermore, people with jobs aren’t spending as much. And well-paid, white-collar employees have been safe from job losses.

Well-funded banks with the power to freeze mortgage payments are one of the key reasons for good house prices until today. They have been tirelessly supporting struggling homeowners and preventing house price decline.

House prices rise quickly and decrease slowly. According to property researcher John Lindeman, when a boom is happening, properties tend to increase in price. But when buyer demand falls, every investor waits until a buyer turns up. Sellers who find it hard to sell their properties often take their property off the market rather than sell it at a lower price. They hold it until things improve. This is exactly what’s happening in Australia right now.

There are also hardly any forced sellers right now. This is largely due to the low-interest rates that help Australians keep up with their mortgage payments. Likewise, homeowners and investors who are having financial issues due to COVID-19 have been given able to regain their loss and defer their loan payments

Currently, around 800,000 people have deferred repayments during the pandemic and experts are concerned this can lead to an “economic cliff” by the end of September when the loan deferral period ends.

A Decrease in Transaction Activity and Rentals
Perhaps, the most significant impact of the pandemic on our property market is the decrease in rentals and transaction activity.

Rental listing fell around 39% during the national stage 2 COVID restrictions in March. This pattern continued and affected sales volume in the months of April and May where it dropped 11.3% from their record last year.

Now that the restrictions have been reduced, listings are back and private sales have been looking strong. The largest rental value decline occurred in the South Sydney region where rental values have been down 4.1% six months ago.

High Price of Homes in Australia’s Expensive Suburbs
Investors will be thankful to know that most capital cities in Australia aren’t severely affected by the economy. As of now, many of Australia’s most expensive suburbs have been continuing to see price growth. Data from various research on house prices shows that premium property remained stable in price from the start of the year until July. The top Melbourne market performed well with almost 20% growth. At the same time, suburbs in Sydney also grown around 27% in price.

Unemployment is The Largest Risk to The Property Market
As many Australians face unemployment, the number of current, upcoming, and potential investors have also reduced. Based on the current data, around 3.% of the working population lost their job since March. Which was then welcomed by a surprise fall in jobless rate as 111,000 people found work in August.

If there’s a group that is most hit by the pandemic, it’s the renters. COVID-19 happened during all-time high unemployment in Australia. The rise of unemployment continued and young people are the most affected.

Particularly, those working in the tourism, arts, and hospitality industry. Rental markets are also affected due to the decline of overseas migration. A large percent of Australian renters are migrants who’ve been from other countries before coming to Australia.

Investors are Spooked, Investment Confidence is Down
Despite the improvements in the health sector, The COVID-19 anxiety is still plaguing the confidence of many current investors and potential investors. While housing is usually considered one of the safest investments, most investors haven’t experienced this kind of market downturn before.

With many auctions and open home inspections prohibited during the pandemic spread, many sellers would resort to holding on to their properties. Restoring investor confidence through stimulus packages is one solution to fix the economy and alleviate the anxiety of investors. It won’t be an immediate solution but if successful, we’ll see the positive impact of it flow into the property market.

Low-Interest Rates Can Help The Property Market
The official interest rates in the country are now at 0.25%. Experts chime in that if you want to ease another downturn, banks should cut the cash rate again.

Should You Invest in a Property This Year?
It is worthy of a reminder that property investment is always long term, and however the economy changes, people will always need good homes to stay in which guarantees the sustenance of the rental markets.

It’s clear that no matter how resilient the property market is, it’s still isn’t immune to the economic crisis. It also makes sense that many Australians are nervous.

The current economic plunge was brought by a health threat. This time the economic issue will be short-term and things will go back to normal once the scare is done.

And although the efforts to contain the virus has brought significant changes to the economy, experts are confident that soon employment will rebound and consumer confidence will increase.

Through studying the pace of recession recovery, it’s expected that the impact of this recession will be short-lived than the 1990 recession or the Global Financial Crisis in 2008.

With the unexpected changes to jobs and more, the pandemic us taught us that finance security is more important now than ever. Investment properties are integral to Australia’s economy and with a sound investment strategy, we can be better equipped for the future. Contact Mirren to book a complimentary strategy consultation.

References:

https://www.realestate.com.au/insights/six-key-reasons-why-house-prices-arent-plummeting-despite-the-recession/

https://www.reuters.com/article/us-australia-property-poll/australia-housing-market-revival-to-continue-into-2020-reuters-poll-idUSKBN1XW00B

Using your equity to add more properties to your investment portfolio is one of the best ways to get funding for your property investment plans. Unlike saving up for the downpayment which can take a long time, using the equity you have right now can help you get started much earlier.

**What Is Equity? **

Have you ever heard of the word ‘equity’ being used by real estate experts? Or have you read articles (like this one) that mention it? Perhaps you’ve heard your broker say “tap into your equity” or something similar…so what is equity?

In simple terms, equity refers to your property’s current market value minus the amount of money you owe on it. Anyone who owns a property has some form of equity no matter how small. In the absence of savings, your equity can help you grow your property portfolio.

Equity is also a common term often used when people talk about property investment strategies. People who are looking for funding will always go to their equity first before trying a home loan from the bank or the government.

How To Invest in New Properties Using Your Equity?

1. Increase the equity in your current home or investment property
Investment properties are like the seeds you plant and watch while they grow. If you want to reap your profits sooner, you must be willing to speed up growth or increase the value by adding fertilizers or in properties, doing renovations. Pay down your loan quickly or buy something at a lower market price then renovate and develop it to sell at a higher price. Both these strategies are some ways you can increase the equity of your property.

2. Get a valuation on your property
With the help of your broker, you can check your current property valuation. If you want to do it yourself, you can also do so by comparing your property online and through real estate agent appraisals.

3. Figure out how much equity you need to afford another investment property
Try to keep it below 80% so you don’t have to pay Lender’s Mortgage Insurance (LSI). You can also use your savings along with your equity. If you have a mortgage on your home, it’s better to lower your mortgage first then extract equity for investing. Remember that home loans are not tax-deductible so if you want to get the most out of your money, use your savings to lower your home loan first.

4. Cash in your equity
Instead of relying on your income from your salary or your business, why not cash in your property equity today? If you’ve purchased an investment property in the last ten years, check your equity. You might already have access to a large pool of cash without even realizing it. You can then use this equity to fund a cash purchase for another property you want to invest in. A lot of homeowners have refinanced their investment properties to gain access to their equity and fund cash purchases on areas with lower property values.

5. Use Your Equity To Get a Bigger Loan
If you don’t have enough equity to buy another investment property, you can always use the funds as a deposit for your next investment. So if you have $200,000 equity in your property, you can borrow up to 80% of that or a total of 160,000 to use as a deposit for your new loan.

Things To Remember:

  • You can maximize your equity through cosmetic renovations in your home. You can do kitchen and bathroom renovations or recarpet and repainting. You can also do extensions in rental investment properties such as granny flats and rooms to increase your cash-flow opportunities.
  • When borrowing equity, always ask your lenders first how much you can borrow and the costs of LMI in the long term.
    If unsure how to use your equity to get a loan, speak with a mortgage broker who specializes in this field.
  • Don’t forget to do risk-analysis each time you get a new investment property. Be realistic and know whether or not you can pay back the loan if you face a period of rental vacancy or a sudden rate rise. Always have an investment strategy that looks for both the current as well as long term benefits. A property strategist at Mirren can help you make the right decisions.

Using your equity to fund new property investment properties is a wise strategy in building your real estate portfolio. However, always be wary of the properties you choose to invest in. Don’t invest in properties that might be too risky for your financial state. If you do, make sure you have plenty of cash reserves. Being prepared for a financial emergency can help you through tough times. That’s why it’s always wise to create a plan before rushing towards a deal. If you’re unsure about the best practices, it’s always wise to consult with a professional to help you out.

Have you planned to add an investment property to your portfolio, but are now hesitant to go ahead? We have helped several of our clients – both first-time investors and seasoned investors, navigate through this current crisis in the best possible manner. We’re happy to give you a complimentary, no-obligation strategy session to discover the best course of action for you. Reach us here.

COVID 19 is testing the Australian economy. While it’s still too soon to tell the extent of the impact it could have on the property market, numerous experts forecasted that there may not be as much negative impact as they first predicted.

Contrary to the initial grim forecasts including CoreLogic’s property market update during the height of the pandemic, price falls are expected to be modest and much smaller. While it’s wise to be wary, there’s no real cause for concern for the property investors who have strategically invested in their properties considering the locations and their life goals. Experts are confident that the Australian economy and the housing market shall rise again.

In addition to that, Australian Govt’s economic response to the pandemic in the form of cash flow assistance for businesses, SME loan guarantee scheme, mortgage holidays, Job Seeker and JobKeeper payments had helped in softening the market weakness and savvy investors are still looking at investing in good properties.

First Home Buyers are still Active

Due to the reducing property prices, first home buyers are now ready, more than ever, to make their first purchase and realise their dreams of owning a house.

First Home Loan Deposit Scheme coupled with Australian Govt’s Home Builder Grant and NSW Govt’s recent announcement to increase stamp duty threshold limit to $800,000 from $650,000 has added to the activity in the market by first home buyers.

Property Prices Plummeting? Not anymore.

House prices have fallen just 2 per cent since the last March-June quarter and property prices continue to grow in Regional Australia showing that coronavirus has impacted the property market differently at different locations.

This is despite hundreds of headlines saying that the housing market is swiftly going down or that prices are very low. During an unemployment crisis and bans on open homes and public auctions, Australian property markets have remained resilient. People are still selling and buying. There’s still activity in the market despite rising unemployment. This is a very positive and welcome result from the previous forecasts by Reserve Bank of Australia governor Philip Lowe.

How does a decline in economic growth and unemployment affect property prices?

During rising unemployment, fewer people will be able to afford a house. For those who still have their jobs, losing their current one may also discourage them from entering the property market. But there’s a bigger and less known scenario during the unemployment crisis.

Historically, increases in the unemployment rate have not necessarily led to house price falls. In fact, the opposite had been the case. The unemployment rate and the monthly growth rate in Australian dwellings have been moderately, positively correlated at about 0.5 for the past two decades.

This means housing growth rates have fallen when unemployment has fallen, and housing growth rates have risen in times when unemployment has risen.

While this may seem counter-intuitive, the housing markets perform well when unemployment rises. That is because when unemployment surges and the economy weakens, the monetary response has been to lower the cash rate. The cheaper cost of debt actually creates growth in housing for those who can still afford to buy.

Tips for Property Investors during the pandemic,

Diversify Their Property Portfolio

Investing in two or three properties is better than investing in only one or nothing at all. Imagine if you invested in a property in an area that doesn’t grow — after five years you won’t have any equity to spend or use to buy other properties. However, if you have three or more properties in different areas, there’s a huge chance that two of those areas will grow and you’ll have access to more equity to purchase another property.

Access Your Equity

Investors can borrow against their homes through a mortgage or a line of credit. This is the safest way to access equity. So in simple terms, you can use your existing home to get a loan for an investment property you’re planning to take.

Understand that property is a long term investment

Panic buying and forced selling have become one of the common results of this pandemic. But it’s important not to succumb to this pressure, as long as you have the funds, don’t force sell an investment. Many investors can lose great properties that are still capable of generating income just because they were spooked by the forecasts and panic. As long as your investment property is still earning, there’s no reason to offload it.

Long-term investments are the only thing that can keep you away from short-term price fluctuations. Invest in a long-term time horizon.

Hold cash reserves

You don’t know when the next opportunity will knock on your door so being prepared can be your biggest strength. A prepared investor will always have the cash to spend when he needs it the most. Extra cash is more than just security, it can also save you during the lowest points in your life.

Buy Value

This is the most obvious strategy and the easiest thing you can do. If you want to minimize losses, then do it right from the start, buy a property that is well worth its price. Start by reducing the risk and your chances of misfortune. Need to know which property will give you the best value? We can help, contact us today!

Take informed decisions

Don’t base your decisions on what other people are doing. Always, believe in sound financial principles and from experts who know their books. Most of us are just following the herd, going with the flow because it gives us a false sense of security. But that’s not the right way to think. Make important decisions based on critical thinking, data, and fundamental financial principles with a focus on long-term planning.

At the end of the day, as an investor, it’s important to feel comfortable with the investment decisions you make in the current property market. Clarity and assurance are always better than not being able to sleep at night knowing that you have loans you can’t pay.

Need help with the strategic planning of your property investment plans? Contact us for a complimentary, no-obligation session.

Renovating properties may seem like an easy way to earn real estate money and increase the value of your home. All you need to do is buy cheap property, add improvements, then increase the price. Sounds simple, right? Not quite. 

While renovating can indeed help you maximize profits, it’s not as easy as it may seem. Although your main plan is to make your property attractive, you need to follow a strategy to ensure your renovation will be successful. 

So how do you start a profitable renovation project? Here’s a beginner’s guide on how to renovate your home and maximize your profits during selling: 

Understanding Valuation

If you want to learn how to properly price your investment property, you first need to grasp the concept of valuation. This is important to ensure that you don’t overcapitalize the property or make uneducated guesses about the profit you will make. 

According to Investopedia, accurate real estate valuations “can help investors make better decisions when it comes to buying and selling properties”.

People who assess property values are called “valuers” and they follow a specific method in measuring the price of each investment property. When they inspect properties, they consider three important elements of your home: 

1) Land– this includes your location, size, topography, and the dimension of property

2) Dwelling  – this includes house age, construction, and condition.

3) Site improvements – this includes fencing, landscaping, pools, or other constructions built separately from the house itself.

Someone who doesn’t understand valuation can price their property ridiculously high, which can affect its sale position in the market.  

Know Your State Building Regulations 

Now that you know a bit more about your home’s value, let’s proceed to the second most important step in maximizing your valuation: planning. 

Before renovating a house or unit you might need a council or body approval first. Most of the time, you don’t need approval for interior renovations, however, if you plan to change exteriors or walls in the property then you may need council approval. 

It’s a grave mistake to start renovating without knowing the rules and regulations of your state. There are also penalties and fees for people who skip this step. 

Determine Your Budget 

Every renovation starts with a budget. Plan how you would allocate your money for the property. 

Don’t cheap out on important products or materials just to save money.  

If you want to cut costs, be smart about it. Opt for low-cost finishing materials. Try to retain the same layout of the room so you don’t have to spend time moving big appliances like gas ranges or sinks. 

Another important thing to remember: save some extra funds for an emergency. Don’t forget miscellaneous funds for repairs and unexpected problems you’ll have to deal with during the renovation process.  

Research Design Trends

You can’t just put everything and anything you like to see in your property. You need to be intentional with your design. 

Before doing renovations, make sure you do your homework. 

Is there a particular design that’s unique to the neighborhood? 

Who are your potential buyers? 

What design do you think will appeal to them? 

Refining The Exterior

Your house’s exterior is actually the first impression you give to the buyer. It’s what they’ll most likely see first when you post photos of your property online. 

The best way to renovate your exterior is through a paint job. It will refresh the look of your home and make it look neat and brand new. 

When upgrading the exterior of an old home, it’s also important to focus on the most important eyesores: dirty paint, rotting siding, cracks (if its a brick home), or damaged roofing. These little things can be a big turn off that can affect your house’s valuation. 

Landscaping 

A beautifully landscaped patio can be your property’s best selling point, so make sure you’re also including it in your renovation.  

Transform boring parts of your yard into gardens or new pathways can be a good renovation plan. Also, instead of changing the slope of your garden, embrace it and work with what you have. 

Upgrading Kitchen

The kitchen is another important area to focus on in your renovations. The kitchen is the heart of the home. It’s where most conversations, family gatherings, and special moments happen. If you want your property to stand out, pay attention, and focus on renovating the kitchen.

Since most buyers want a functional kitchen that includes modern appliances and ample storage, experts say the kitchen is where you should allocate the most money if your renovating interiors. However, it doesn’t mean that you should overdo it. A great trick for remodelling kitchen is to refinish kitchen cabinets. This can create a brand new look and feel within the space. 

Upgrading Bathroom 

Like the kitchen, the bathroom can be one of your property’s best selling point. The more functional and aesthetically pleasing your bathroom, the greater the chance it will attract buyers. When renovating the bathroom, don’t forget to add storage. 

The bathroom storage should be simple, space-saving, and functional. You don’t want to put a large storage cabinet in an already small bathroom. 

Replace Flooring or Carpets  

The floor is also one of the first things that buyers will notice when entering your property. To exceed buyer expectations, you need to keep your property’s flooring updated, clean, and stylish. This is why it is essential to fix broken tiles, replace old carpets, and polish dirty hardwood floors.

Financial plans and goals are crucial to make sure you’re on track with your investments. In real estate investing, it’s not enough to just purchase a property, you have to be clear on what path you want to take in terms of financial strategy, you also have to monitor your progress, and learn to prepare or adjust for potential problems. The following are useful tax and bookkeeping strategies for your year-end financial planning. 

Understand What You Can and Cannot Claim

Part of your strategy is being knowledgeable when it comes to your taxes. You should understand how taxes work and know your advantages and disadvantages as an investor. Did you know more than 80 percent of investors make mistakes when calculating their deductions? To prevent this from happening, make a list of claimable tax deductions for your investment property. Here are some of the most common claimable tax deductions you don’t want to miss out on:

Advertising costs – If you’ve posted ads for your rental property through the internet or used printed media such as signs and brochures, you can claim these expenses in the same year.

Land Tax – Do you have a rental apartment on your investment property? If so, you can use land tax as a deduction. The amount changes significantly between states so it’s advised to consult a tax advisor.

Legal Expenses If you’ve evicted a tenant or going to court for unpaid rent, you can claim all your expenses for the preparation of legal documents.

Loan interests  You can claim the interest on your loan for investment properties and any bank fees for servicing that loan. 

Repairs – Repairs made during the lease period is deductible and should be carried out within the initial 12 months of ownership. However, the improvements you make aren’t deductible and can only be claimed if they were depreciated and claimed during the course of their life (ex.appliances).

RentThe income you receive from rent is taxable to the property owner. However, the rent must be at the normal market rate in order to claim the expenses in the complete amount. It must also be declared in the year which it was received. Getting a rental investment property comes with its fair share of questions. Find the answers to your most common rental investment queries here.

As an investor, you need to be aware of all your property expenses as this will help you save money in the long run. Here are other deductions you can claim to maximize your tax breaks:

  • Agent fees
  • Annual power guarantee fees
  • Appliance depreciation
  • All tax-related expenses
  • Bank charges
  • Bookkeeping fees
  • Cleaning
  • Council rates
  • Electricity and gas
  • Gardening and lawn expenses
  • In-house audio/video service charge
  • Insurance of your rental property
  • Building and public liability insurance
  • Mortgage discharge expenses
  • Pest control
  • Quantity surveyor fees
  • Repair and maintenance
  • Security
  • Strata fees
  • Telephone
  • Temporary tenant relocation
  • Water charge

Importantly, stay transparent and honest

As easy it is to try and cheat by simply claiming renovations or other activities which you have done yourself, don’t do it. Penalties are harsh for people who claim wrong expenses as well as those who fail to declare their income. Sometimes, you can have an honest mistake of recording an expense twice, to prevent this from happening, try to avoid expenses paid by your property manager.

Don’t Throw Away Your Receipts

“No receipt, no deduction” is the ATO’s motto which is why it’s important to keep all receipts of your expenses. Whenever you claim a deduction, you must have the records to show for it. The ATO contacts rental property owners annually to inspect their claims, and each year the number of people they survey is growing. To ensure you don’t run into problems, safeguard all your receipts.

Receipts must show the following:

  • Name of supplier
  • Expense amount
  • Products or Service Description
  • Date paid
  • Date of the document

Take Advantage of Property Depreciation

One way to reduce your taxable income is by claiming maximum depreciation deductions. Depreciation is defined as the decline in value tax deduction for building structures and assets of income-generating real estate. Most residential rental properties depreciate at a rate of 3.6 % per year. Many people fail to claim these deductions resulting in thousands of dollars lost.. 

Find A Good Accountant

Taxes have become a lot complex in the last few years and finding a qualified professional to do tax for you is more important than ever. But perhaps the number one mistake of most investors is hiring an accountant who doesn’t understand property.  Not all accountants are knowledgeable in real estate, so make sure you’re working with someone who specializes in the exact investment property you own.

You need someone who isn’t just good with taxes, you need someone who is also up to date with laws surrounding property. Good accountants can give you insight into what you can and can’t claim. They can also give you appropriate advice when claiming your deductions. Accountants can even be a valuable part of your team so don’t hesitate to invest in hiring top talent for the job.

Many investors try to do tax themselves and end up miscalculating or working a lot harder than they should. Hiring a trusted accountant is always better when you want to save money. Here are just some of the things a great accountant can help you with:

  1. Leverage tax benefits for your investments
  2. Track your business transactions
  3. Keep your financial record organized into a system
  4. Help you achieve maximum results

Need a good accountant? Reach Joy Ford, at Beyond Taxation.

Final Thoughts

The secret to maximizing your profit is to make every investment property work for you. By knowing all about your tax advantages and strategies you can do so you won’t spend weeks worrying about paperwork, you can manage your tax in the most efficient way possible. Making the most out of your potential tax deductions won’t make you rich—but it surely will help you save a lot of money in the long run.

Sources:

  1. Investment property tax deductions – what you do not want to miss out on” — rams.com.au
  2. 7 tax tips for real estate investors at EOFY” — realestate.com.au
  3. EOFY tax return tips for property investors” – statecustodians.com.au
  4. Eight tax tips for end of financial year property investment planning” – smartcompany.com.au

Buying investments during a global crisis can be stressful. Big changes are happening in all industries and it’s normal for investors to experience fear. However, there may be real advantages to them, especially now when prices are falling.

How would you like to own a property that generates income every week and finances you with the money to purchase it?

That is the charm of cash flow positive investment properties. Cash flow positive investment properties are types of investments that produce monthly income that exceeds its holding costs. The word ‘cash flow’ is the term for the income generated by your rental property after tax deductions and depreciation. Most cash flow positive properties earn enough to cover the costs of the property expenses, including maintenance, management fees, and mortgage.

Whereas, a cash flow negative property is one where the income does not cover the expenses and you need to add funds from your pocket. This is different than Negative gearing. Read more about Negative Gearing here.

Learn more about cash flow investments and arm yourself with savvy real estate knowledge to keep your wealth in check during these struggling times.

A Deeper Look at Cash Flow Positive Investment Properties

First-time investors are often scared to jump on big investments because of uncertainty and lack of experience in investing. With cash flow positive investments, they will have the confidence to purchase their first investment property. This is because of how easy cashflow positive investments earn you money. Unlike long-term price appreciation which isn’t set-in-stone often unpredictable, cash flow properties are consistent and will generate your income right from the start.

Nervous and first-time investors will find this strategy less risky and more appealing. Over the years, they’ll learn how to handle multiple investments, improve their portfolio, and ultimately increase their wealth.

Pros and Cons

Before jumping right into any investment strategy, it’s crucial to know what you’re going to experience. So here are some pros and cons of cash flow positive investments you need to know.

Make Money Right from the Start
Cashflow positive investments allow you to earn money early on through rent. Unlike other investments where you have to wait for months or even years to start earning, cashflow positive properties generate income right from the start.

Earn Enough To Pay The Property
If you use the money to pay off the mortgage, you can eventually pay off the property in just a few years. So yes, it does seem like the property will be paying for itself and you’ll not lose a single dollar.

Grow Your Investment Property Portfolio
Cash flow positive investment properties can improve your real estate investment portfolio. Through earning extra money, you can not only pay off the property but also save enough to buy another one. The more properties you own, the faster you can reach all your investing goals.

Increase Your Borrowing Power
Getting your loan approved is harder during struggling financial times. However, with income-generating investments, you’ll be in a much better place than other investors. You’ll have better luck with lenders as they will approve your loan more easily. Here’s more on diversifying your investment property portfolio. The more investment properties you have, the more lenders will view you as a trusted and reputable investor.

Help You Fund Other Investments
The income you generate from your cash flow can help you earn enough to buy new investments or fund your retirement plan.

Of course, there are some limitations to this investment. Although the pros outweigh them, it’s essential to know what you’re going to have to deal with. Here are some things to consider when purchasing cash flow positive properties.

It’s Taxable
Income generated from cashflow is taxable. So although it’s a great income-generating extra fund, it is taxable and hence you need to do the math right to make profits.

Like most investments, it is not without any risk
Most of these properties can be in regional areas which means there’s a bit of risk involved in its long-term growth potential.

How To Find A Cash Flow Positive Property?

Finding cash flow positive properties to invest in is easier said than done. Here are some guidelines to help you purchase the best income-generating property for you today:

  • Check the vacancy rate in the area. The lower the rent in the area, the higher the vacancy rate.
  • Research about industrial developments in the area. Area demographics are often determined by this factor, so the more progressive the location, the higher potential of properties to perform well.
  • Know the population growth. Don’t invest in locations where people don’t see themselves living for years to come. The higher the population growth, the greater the demand for rental properties.
  • Simply put, you need the right investment strategy and look for an investment property which will fulfil your investment goals. At Mirren, we will help you through the whole process seamlessly? Curious how it all works? Contact us or call on (02) 8814 5275.

Final Thoughts

Investing in cash flow positive properties is a great way to build wealth and make money in real estate. However, just like all other kinds of investments, you need to have the right investment strategy and need to be smart in finding properties to invest in. When choosing your first investment, try to focus on cash flow positive properties that have a high potential for years to come. It will not only give you an extra source of income but also help you pay off your property in the near future.’

Need the right investment strategy? We can help. Contact us here.

References:

The bushfires in December 2019 and the coronavirus pandemic are two of the most recent events that have brought significant changes in the Australian real estate market. Catastrophic events like these are out of everyone’s control and it is natural to feel confused and helpless as a property investor.

Despite all this, one should always remember that the real estate market has always survived recessions with huge rebounds years after. The harder the market falls, the higher it jumps back. Good investments can even go unscathed after the chaos is over. The global economy will adapt and learn from events and will come up with better survival strategies in the coming years.

Earning profits from investment properties is one thing and keeping that investment property safe is another thing. There’s no assurance of profit in any investment. So, protecting your investment properties from any kind of loss becomes paramount and more important than anything else. If you want to keep your investment safe, you need to be prepared to protect it, not just from mistakes that can hurt you financially but also from potentially devastating scenarios such as a pandemic.

Investments are long term projects and during challenging times, it’s more important than ever to make the right decisions. So how do you protect your investment from these crippling economic downturns and unexpected market crashes? Let’s have a look at the available options:

Take Advantage of Low Mortgage Rates

Low-interest rate means it will be much easier now to own or invest in a property. Knowing when to buy and when to sell your property can have huge rewards. This is why smart investors hire financial advisors to help them navigate through tough financial times.
Since most people are working from home right now, or have reduced income, or are unemployed, house prices will continue to fall. Investors must take advantage of this by purchasing properties or paying down mortgages and reducing debt. During market crashes, it’s not a good idea to have too much debt, and you would want to pay all your debt as quickly as possible.

Apply for Landlord Insurance

Just like how you would purchase insurance for your home, you can also get insurance for your investment properties. Most of these insurance cover rent arrears, damages from accidents (fire or flood) as well as potential damage from tenants.

When looking for insurance, don’t make the mistake of buying cheap ones to save money. Make sure that you’re getting insurance from a professional and trustworthy company.

Insurances are like umbrellas, they will keep you feeling secured and safe, and will help you during tough times and unforeseen rainy days.

Start Diversifying Your Property Investment Portfolio

Diversification is an important investing strategy to reduce risk, maximize your returns, and protect your investments. When choosing properties to invest in, explore all types: properties with plenty of cash flow, properties with low rent and high rent, and so on.
Don’t make the mistake of investing in only one real estate. Don’t ever limit yourself to one. Most investments start out as good but you never know when the market is going to change. Even “5-star” investments can suffer in recessions. Regardless of how good you think your investments are performing, don’t assume that it will always do well.

During times of uncertainty, diversification helps your portfolio if one sector goes down. Australia’s volatile and unpredictable real estate market is a big proof of why investors need to diversify.

Hire a Property Manager

You may have extensive investing experience but sometimes experts also need a little help. In challenging times like these, it’s always a good idea to ask for a property manager’s help. When choosing the right person for the job, make sure to ask for references, and get in touch with their previous clients. You can also hire a management company if you have the budget. Although they cost more, they can help you maximize your property value, keep repair costs down, and take care of routine maintenance issues.

Save Funds for Emergency

Salary cuts, delays in payout, and unemployment can all take a toll on your finances during tough times. So make sure you have your war chest ready and are prepared for the worst. The problem with most people is they underestimate how much-unexpected bills can damage their finances. In fact, more than half of investors, don’t have enough emergency funds or insurance for their investment properties.

Before you triple your investment, make sure you have saved enough to help you survive during a recession. Make your emergency funds easily accessible. This will help you cover losses and prevent you from using your retirement money in a cash crunch.

So how much emergency found should you have? A full-time real estate investor with an irregular income should have 3-6 months of emergency funds ready. A landlord will need a much larger emergency fund. Landlords and real estate owners need to have emergency funds for each of their properties.

Final Thoughts

Being an investor in times of financial struggles can be challenging, and understandably so. It’s okay to feel stressed—but don’t panic. How you approach your investments today can help you a lot in the future. In times of uncertainty, remaining patient and smart is the key to earning wealth. At Mirren, we can help you make the most of all the opportunities the current scenario has brought to the Australian property investors. We’d be happy to connect!.

Real estate investing can be challenging, especially for first-time property investors. There are many things to consider before you choose and pick a property to put your money in. One thing most investors often underestimate is their financial capability. Do they have enough funds to pay the lender if their tenant leaves? What will happen if the economy halts amid a pandemic – just as we are right now with the coronavirus pandemic globally? What will they do if rent drops?

In a saturated rental market, nervous investors may look for safety nets to avoid huge losses. This is where rental guarantees become beneficial. In this article, you’ll learn more about rental guarantees.

What are Rental Guarantees?

Rental guarantees are risk-management solutions offered by developers for investment properties. A rental guarantee assures the buyer that he’ll get a percentage return after his investment property is on the market for rent. Rental guarantees help developers find more buyers and instil confidence in people who might be fearful of investing in the first place.

There are two categories for rental guarantees. The first one, ”Rental Assurance” is a form of rental guarantee wherein a developer will guarantee the gross rental return to the investor. Rental Assurance is a direct approach and often put in contract in an ‘Under Lease’, which means that the investor will lease their property back to the developer for a certain period for a fixed payable price. The next one is the ”Rental Guarantee” which is in itself an insurance policy that needs to be operated within the jurisdiction of the investment.

During times of instability, a rental guarantee can help you see through your income potential. Investors who put their money in properties with rental guarantees can get good returns even if they lose clients or tenants. With a rental guarantee, you’ll be receiving stable cash flow, no matter what the circumstances are.

If you’re apprehensive about investing during this time of crisis, seeking a property with a rental guarantee can help. Many developers in different locations in Australia are already providing rental guarantees. In inner-city Melbourne, where rentals are low, rental guarantees offer a safety net for investors.

Advantages and Disadvantages of Rental Guarantees

In this section, we’ll discuss the positives and negatives of rental guarantees. Let’s start with advantages:

Income Stability

Rental guarantees provide stable income to property owners as they aren’t affected during falling market rents or vacancies. The landlord will receive a guaranteed rental income every month during the time of the arrangement. The rental guarantee can also be significant protection for landlords against loss of income when tenants fall behind payment.

No Extra Expenses

Unlike other insurance deals, there’s also no extra expense cuts which mean you’ll get your rental return precisely as what you’ve negotiated. There will be no monthly commissions, set up fees, or hidden expenses.

Confidence Booster

Are you a newbie investor? Rental guarantees are great options for investors who don’t have the experience, time, and confidence to pursue their dream investments. With a rental guarantee, they will have a safety net, should problems arise.

Now let’s see some of the disadvantages or risks rental guarantees may have.

High-Cost

If you’re not smart enough, you may fall prey to developers who inflate property prices and use rental guarantees to make the investment look good. This is their technique to lure and attract investors. Are you looking for secure property investment? The property strategists at Mirren can help.

Limited Control

During the period of returns, the landlord may not have power over the property. This means the developer or agency can control the tenants in the investment property. If you’re a new investor and want to create a great first impression, putting the care of your tenants in someone else’s hand can be a risky move.

Considering the risks, how should you go about finding an investment property with a rental guarantee which will help you invest with more confidence?

Who Offers Good Rental Guarantees?

Not all companies and agencies who offer rental guarantees have your best interests in mind. To get the money they need for rental prices, they often charge more than the market price. So, how do you know which ones are legit? You can consult an investment property strategist (like us) to help you purchase the right investment property.

Work with Investment Property Strategists

Look for investment properties and property management companies that can save you the stress of losing income during your stabilization period. An experienced investment property strategist will provide proper guidance and help you choose a property that is most secure and fits your investment capabilities. Need help with this? Mirren Investment Properties is here for you!

Have you planned to buy an investment property, but are now hesitant to go ahead? We have helped several of our clients – both first-time investors and seasoned investors, navigate through this current crisis in the best possible manner. We’re happy to give you a complimentary, no-obligation strategy session to discover the best course of action for you. Reach us here.

What should be your next step as an investor?

As of April 15, 2020, the coronavirus outbreak, has already infected 1,970,879 people in the world. The pandemic is becoming one of the world’s most significant threats to the global economy. From the surging decline in stock prices, bond yields, and cash rates to disruptions in various industries and businesses, the ongoing spread of the virus is creating global financial shocks that we may need to brace for. All is not doom and gloom, though, and there are several relief actions taken by the Government. Some of them like the record-low interest rates can be an opportunity for prepared, seasoned investors.

The real estate market that has always fared well amidst recession is not immune to the virus and may be in for a bumpy ride. In fact, a slowdown in the housing market activity was seen as early as March. With unemployment potentially reaching 11% by June, property prices will continue to dip—temporarily. The decline in property prices is being leveraged upon by sophisticated property investors, keeping the market afloat.

There is hope amid this pandemic. In China, after the movement restrictions were lifted, property transactions have recovered 50% of their four-year average. In other words, this lockdown will only last for a short while and markets will rebound after the crisis is over.

To quote 9 news, “Thousands of savvy buyers think now is a good time to purchase a home as record-low interest rates and declining competition at auctions provide a window of opportunity for many first-home-buyers.

Consumer data from Finder, given exclusively to 9News.com.au, shows that 42 per cent of Australians think now is surprisingly a good time to buy property, despite the challenges presented by COVID-19.”

Housing Market Activity Statistics

The Australian property market is showing uncertainty, but that uncertainty can be an opportunity for savvy investors.

CoreLogic has shared data about the daily happenings in the real estate market. In a recent survey with real estate professionals including real estate agents, agency principals, property managers, and administration — they found that 33% of the surveyed revealed that they noticed a 50% decline in buyer inquiry attributing to the rising unemployment. With consumer confidence dwindling and as the turn of events worsen, house prices are predicted to plunge. This is where some investors may be ready to strike to action and make the most of the low prices and interest rates.

Economist Shane Oliver predicted a 20 percent drop in Sydney and Melbourne house prices following the increase in unemployment this year. And the worst part, according to experts is, we don’t know how long this will last. Property markets have always fared well in recessions, for example, the last one in 1990 created only a 4% decline in house price, presenting hope. The pandemic has forced the real estate market to work differently. Several digital means are being adapted swiftly at all fronts. Remote property appraisals, private and virtual inspections and virtual auctions have taken the forefront and are enabling the market to stay active.

Even at Mirren, we have been swift to improvise our ways to operate efficiently and give our investors the direction they need during these times.

Amongst all the properties, we are finding that some premium value properties will decelerate the most this year because of the stock market crash.

The outbreak has already resulted in job losses, particularly in lower-paid sectors. Despite this, investors and households whose income remains stable can take advantage of these low rates. Seasoned investors in a good financial position and an active investment strategy are in a good position to invest.

What The Property Market Looks Like Today?
April has been a month of disruptions in the property market. Auctions are done using digital platforms, and buyers have mixed outlooks about taking action.

As of today, there are currently two types of people in the property market: the discretionary and nondiscretionary sellers and buyers. During times of uncertainty, the discretionary group often goes on strike.

Still, there are buyers and sellers left in the market. People who sold their homes just a few months ago are currently looking to buy a new property. Those who have recently bought properties will also want to sell their old homes. Young couples who want to start families, those who are getting married, or having babies will also want to buy properties during this time.

Still, there are buyers and sellers left in the market. People who sold their homes just a few months ago are currently looking to buy a new property. Those who have recently bought properties will also want to sell their old homes. Young couples who want to start families, those who are getting married, or having babies will also want to buy properties during this time.

Long Term Effects of The Outbreak in Australia’s Property Market
Here are some expert predictions on the long-term effect of the virus spread in the property market:

A decline in population growth
Australia’s current population grows to around 360,000 people per year meaning, to accommodate new households, we need to build about 180,000 new dwellings. However, since more than half of the population is dependent on immigration, growth will most likely fall because of the travel ban happening around the world. Since international travel is restricted, the property market will rely on more local travel by Australians – Interstate migration will bring some movement.

It’s also predicted that 40% of the population will resort to renting due to a lack of funds. This again presents a window of opportunity for property investors as there will be more renters in the market. Until there more affordable housing options, many people will settle to rent spaces than buy their first homes.

Record-low interest rates

The sustaining low-interest rate situation has made it easier to own a home, especially for an investor or an owner-occupier. Thanks to the affordable finance for investors, the overall expenses are at the lowest they’ve been since a very long time.

Whether you need some guidance about your investment property portfolio or are keen to make the current situation work in favour and get into the property market, we’re here for you. Contact us today for a complimentary, no-obligation strategy session.

Sources:

  1. Coronavirus Update – worldometers.info
  2. “Unemployment rate set to reach 11% by June. Economy to contract by 3.5% in June quarter. Sustained recovery not expected until Q4.” – westpaciq.westpac.com.au
  3. The CoreLogic Datasets Capturing The Coronavirus Shift – corelogic.com.au
  4. “Coronavirus pandemic could see house prices plummet by 20 percent, economist warns” – abc.net.au
  5. “Coronavirus – How will it impact Australia’s property markets? Your 20 most common questions answered.” — properetyupdate.com.au
  6. https://www.9news.com.au/national/coronavirus-pandemic-property-buyers-hunt-for-bargains-as-sellers-withdraw-homes/4c441c92-a668-42a4-b39a-c24265510e38

Some may have recently lost their job because of the coronavirus pandemic and are currently scrambling to pay the rent. What should they do? Rent breaks and price freeze are some of the common discussions among tenants, real estate investors and property owners during the COVID-19 crisis.

In this time of suffering and great uncertainty, real estate owners are encouraged to deal with their tenants sympathetically, but to what extent? And how should banks respond to negotiations for mortgages?

Find all the answers as we debunk some myths on real estate during COVID-19 Pandemic.

Myth #1: Tenants Don’t Have To Pay Rent For Six Months

This is false. The Prime Minister announced on 29th March that all State give a 6-month moratorium on evictions for tenants in financial distress. A moratorium is only a delay or suspension for evictions but tenants will still have to pay their rent after the coronavirus crisis. Tenants are still expected to pay up and honour their leases and rental agreements after the given date. Whatever rent or bills you owe, you still have to pay eventually.

Tenants who will not pay rent once the moratorium ends may face eviction. As of now, there are currently no special provisions for rent assistance and so far only Queensland has agreed for a one-off payment of $2,000 if you lost your job during the pandemic. For now, residential tenants, landlords, and agents are encouraged to discuss and agree on alternative arrangements.

Myth #2: You Can Evict A Tenant For Not Paying Rent

Landlords aren’t allowed to apply to the Tenancy Tribunal to evict tenants for rent arrears unless the tenant is at least 60 days behind in payment. The Tribunal will also look and consider the circumstances of the tenant and if the tenant made reasonable efforts to pay rent.

Landlords can proceed with legal processes however they must follow the processes by the Residential Tenancies Act 2010. Also, tenants can’t be evicted without orders from the NSW Civil and Administrative Tribunal (NCAT).

The Tenant’s Union and more than 100 organizations in the country are also calling the state to put stop on evictions during this health crisis.

A time of great suffering like this calls for solidarity and compassion amongst everyone. We are all worried about our own finances, but this isn’t the time to abandon our humanity.

What Options Do You Have as a Tenant?

Tenants can negotiate their cases with their landlords. If you’re already in serious trouble before the coronavirus crisis, it’s unlikely that your landlord will be penalized for evicting you. If you’re a good proactive tenant, you can also attempt to ask for a reduction for a short period of time or ask for a repayment plan. When creating repayment plans, make sure that the case is made in writing and both signed by the tenant and landlord.

Landlords are not obligated to agree but are encouraged to do so, especially if the tenant has shown sufficient evidence of a decrease in job hours, rates, or unemployment.

What Options Do Landlords Have?

Most banks are also extending help for landlords under financial woes. You may find that your bank is currently pausing loan repayments for six months.

You can call your respective broker or bank to discuss your financial uncertainty. You can also ask for help and check if you’re eligible for the Government’s stimulus package.

Myth #3 Landlords Should Reduce Tenant’s Rents

Tenants can negotiate rent reduction but landlords are not obligated to agree. When negotiating, landlords have the right to request personal information such as letters from employers if you lost your job or bank statements showing your financial situation.
To protect the people, the Minister of Finance has also announced a temporary freeze on rent increases and tenancy termination. This is a law announced on March 23 through the COVID-19 Response Amendment Act.

Myth #4 Tenants Should Pay Rent If They Signed a Lease on New Place

Due to the current movement restrictions, tenants can withdraw notices if they aren’t able to move into the new place. If your current tenancy is overdue, you should negotiate with your landlord to extend the current tenancy as much as possible. This guideline will prevent further burden to tenants who may be stuck to paying rent for two places at once during the course of the lockdown.