The Blog

Feb 4, 2016

DON’T FEAR THE REAPER: 10 THINGS TO DO IF YOUR TENANT DIES

IT SOUNDS UNPALATABLE, AND CERTAINLY NO ONE WOULD WISH FOR IT, HOWEVER IF A TENANT DIES IN YOUR RENTAL PROPERTY, THERE ARE A NUMBER OF IMPLICATIONS THAT YOU SHOULD BE PREPARED FOR. While landlord insurance can cover you in the event of a tenant’s death, different policies offer varying levels of cover, explains EBM Insurance Brokers’ RentCover division general manager, Sharon Fox-Slater. “The financial costs vary depending on the situation. There can be direct costs, in terms of lost rent and clean-ups, and indirect costs if a property is slower to re-lease because of the associated stigma. Most landlord insurance provides some cover if a tenant dies, although the extent varies depending on your insurer,” Fox-Slater explained. She cites the example of a pay out they made to one investor, in the tragic event of a murder suicide in Melbourne, where a $50,000 repair bill and further $22,000 of lost rent over a 10-month period were funded by ther policy. New carpet, tiling and repainting was required. Other claims included a $17,000 loss of rent over 11 months due to a tenant in Perth’s passing and the real estate agent’s difficulty tracking down next of kin to recover their goods. Another case mentioned by Fox-Slater included a Melbourne tenant who committed suicide and had no next of kin. In this case, the State Trustee becomes responsible and the landlord was unable to access the premises until the possessions were auctioned and a funeral had been held. The lost rent paid out in this case was $11,000. Frequently, for tenants living alone, the landlord or the property manager can be the person making the discovery of a death, when looking to find out why rent has not been paid. “Dealing with a family that is grieving can make negotiations around issues like clearing out possessions quite difficult. However, many property investors aren’t in a position where they can afford to lose money indefinitely,” she said. 10 TIPS TO BEAR IN MIND IN THE EVENT THAT A DEATH MAY OCCUR: 1. Be tactful, sensitive and compassionate in all dealings with the tenant’s family and friends. 2. Contact the next of kin and pay your respects. 3. Ask the next of kin who they would like you to deal with regarding the property. 4. Contact your insurer to ask about your cover and what paperwork is required to make a claim, for example a death certificate or published funeral notice. 5. If police are involved, liaise with the officer in charge of the investigation as to when access can be expected. 6. Organise a meeting with the person nominated by the next of kin about plans for vacating the property. Approach the conversation tactfully. 7. Offer the person contacts for firms who might be able to help pack, sort and store possessions until the family is ready to deal with them. 8. Be sensitive about the timing of any open for inspections or other contact – being mindful of events such as the funeral. 9. When the property is vacated, clean it, using specialist assistance if necessary, and re-advertise it for lease. 10. Keep all receipts and records to assist in your landlord insurance claim. Source: RentCover By Jennifer Duke Tuesday, 15 April 2014 from propertyobserver.com.au

Feb 4, 2016

PAUL CAINE’S WEEKLY MARKET REPORT – APRIL 8TH

Feb 4, 2016

PAUL CAINE’S WEEKLY MARKET REPORT – APRIL 2ND

Feb 4, 2016

SIX THINGS YOU MUST NOT DO AS AN INVESTOR

We all get told what we should be doing with investment properties, but it’s not as often you get told what not to do. Here are six mistakes that you do not want to be in the middle of. ASSUMING YOU WILL NEVER SELL One of the common misconceptions in property is that you will just hold the asset forever. While for some this is the case, it’s far more likely that you will need to sell the property at some point. If you do not think about your exit strategy, you may find yourself missing out on other opportunities or, worse, you may find yourself unable to sell the home if the worst happens and you do need to sell. Thinking about how it will sell, and when may be optimal, is very important for every investor. Never make the assumption that you will hold for the long-term. By all means, plan ahead, but ensure you have that escape route in mind. DIY-ING WITHOUT EXPERIENCE Many an investor has gone into their property and attempted to fix, renovate or style a home on their own – with no prior experience. If you’re a sparky by trade, then go ahead and get hands on. But if you’re not exactly handy either get trained up first or back off. Don’t risk wrecking your property or rendering it unsafe for yourself and others by trying to save some money on labour.FORGETTING TO LOOK FOR INDEPENDENT ADVICE It’s all well and good having a chat with the real estate agent selling you a property, or the developer who is building the apartments you have been looking at. But nothing can replace solid, independent advice from impartial and qualified professionals. Seek out a second opinion where possible, and always be looking for what their ulterior motive may be. POSTPONING MAINTENANCE AND TENANT REQUESTS While tenant requests can be difficult and, for some, an irritation – you cannot brush them aside. The best landlords will always keep a close watch on what their tenants are asking them to fix – perhaps there’s an indication of a bigger problem, or perhaps the entire home needs updating. Similarly, small problems have a habit of spiralling into larger ones. That small leak under the upstairs sink? It’s now a large leak that has spread to the downstairs ceiling. Don’t let things get out of hand when the fix may have been small in the first place. Remember that your tenants are living in this property as their home and are deserving of a high standard – keep your tenants happy, and they will usually look after your property. IGNORING YOUR OWN RISK PROFILE Don’t be encouraged into buying or engaging in a property or scheme that makes you uncomfortable. There are plenty of opportunities to jump out of your comfort zone in life, but when it comes to your finances and your retirement plan this might not be one of them. Be honest with yourself about what you are comfortable with, including how much debt and outgoings you can accept and don’t be coerced into doing anything else by external parties. If you do feel you are being too conservative, speak to someone close to you that you can trust. Remember, though, what is right for someone else isn’t necessarily right for you. JUMPING ON THE BANDWAGON Lastly, we have a tendency to see what other people are doing and getting excited about it. There’s no harm in following trends, but you may find that it stilts your potential growth with investments. Many people following mainstream media reports of ‘hotspots’ or the advice they get from their parents at a barbecue are likely to see themselves buying into the market far too late. Do not get caught up in property hysteria that sees many overpaying and missing out on the best growth. Always take a step back and look at the entire picture. By Jennifer Duke Friday, 14 March 2014 from propertyobserver.com.au

Feb 4, 2016

DEPRECIATION: THE FOUR THINGS YOU SHOULD KNOW

Like many topics surrounding tax, depreciation discussions are interlaced with myth and truth. As properties get older, as do their contents, they depreciate in value. While this doesn’t necessarily point to a drop in capital growth, it does match up well with wear and tear and age, and as such the ATO allows investors to claim a deduction on the building aspect, as well as the ‘plant and equipment’ within. A quick trick to determine plants and equipment is to imagine the property being picked up and shaken. If it falls off, then it is in this category. Deductions equate to tax reductions for you, and can assist in reducing your holding costs legally. However, there are four things you need to know about depreciation. IT IS AN ‘ON PAPER’ COST, BUT THIS DOESN’T MEAN YOU SHOULDN’T TAKE THE COST SERIOUSLYWhen claiming the deduction from the ATO for tax depreciation, you’ll find that while they’re calling it a ‘cost’ – nothing came from your pocket. This ‘on paper’ cost may not have yet cost you, but don’t consider it free money. There’s a reason that the ATO provides funds for depreciation – and that’s because at some point you’re likely required to replace the plants and equipment and undertake repairs. Many property managers recommend that investors actually use the depreciation guideline to get an understanding of when they’ll likely need to re-carpet, or replace appliances. Get a hold on the ATO’s ‘life’ expectation for what is installed and prepare yourself to spend this money to get your property back into good condition. YOU CAN CLAIM DEPRECIATION BENEFITS ON THINGS YOU THROW OUTThis is a little-known aspect of depreciation called ‘scrapping’. If renovating or altering a property, it’s likely you’ll throw some things out. If you decide to remove the carpet, or light fittings or any other aspect, keep records and provide them to a quantity surveyor. They should be able to add these into your depreciation schedule for a return from the tax office. Expect to receive a 100% deduction on the residual value of what has been thrown away. OLDER PROPERTIES LIKELY STILL HAVE DEPRECIABLE ITEMSWhile knowledge around depreciation is growing, there are still some who do not think older properties can achieve a substantial depreciation benefit. This is not true. If you have not been claiming your tax deduction, you can get your previous returns adjusted. Many quantity surveyors will not charge you if the amount they manage to claim you back doesn’t cover their bill. If you have a property that has been renovated in some way, or extended, even if you were not the person to undertake these improvements then you will find there are extra depreciation benefits here too. You may not even realize that something has been updated within the property, such as hidden items e.g. plumbing, re-wiring or bathrooms that are dated but newer than the property itself. THERE ARE TWO WAYS OF CALCULATING DEPRECIATIONThere are actually two ways to calculate depreciation. These are the following methods: DIMINISHING VALUE PRIME COST Investors can choose what suits them most. Diminishing value calculates the deduction as a percentage of the balance left to deduct, while the prime cost calculates a percentage of the cost for each year calculated. Essentially, diminishing value allows investors to access more in the first five to 10 years of ownership. If you are requiring more funds, or looking to sell in the short-term, then you might consider this method. However, prime cost provides a steady amount of depreciation year-in, year-out. This may suit those holding for longer or who prefer a fairly certain return each year. By Jennifer DukeSunday, 30 March 2014from propertyobserver.com.au

Feb 4, 2016

FIVE TIPS FOR YOUNG ASPIRING PROPERTY INVESTORS

I caught up with a friend last night after she returned from a great holiday. As the conversation steered from cruise ships to saving money, she voiced her aspiration to purchase an investment property. At 32 years old, I was thrilled to hear from someone so young – just shy of her 21st birthday in fact – who is already contemplating her financial security for later in life. I believe that the best executed plans in life are always those that are planned as early as possible. The thing about starting in property investing at a very young age is this: at just 20 years young, my friend will face a slew of challenges. However, these challenges should not deter her. In fact, well-planned property buys at a young age can really expedite growth and gain for later in life. You just need to find work-arounds for the (many) challenges you will face. Here’s a list of considerations for very young (under-25) aspiring investors. Identify whether property is the right investment class for you A property is a big commitment for anyone, but especially for a young person. I say this because between the ages of 18-25, young people are likely to have many lifestyle changes, and most of these will be unexpected. First are the financial ones: moving out of home, working part time if a student and earning a modest – and sometimes inconsistent – salary. Then there are the lifestyle ones: deciding to go backpacking for a year randomly, changing study courses or stopping/starting full time work for study reasons. Plus, as the busiest social years of your life there’s partners, friends and parties/adventures away. What I’m getting at is this, it can be an unpredictable and inconsistent time in your life. Property investing best suits people who are disciplined and understand it is an ongoing commitment that requires focus. For this reason, investment classes that are less admin-heavy – such as shares, term deposits and managed funds – can be more attractive and a safer investment for first time younger investors. MANAGING YOUR OWN EXPECTATIONS   It’s smarter to do this yourself, because there will be many other parties (parents, lenders, solicitors, and so on) who will be the quick to serve you reality checks at every stage. This won’t happen as often and won’t disappoint or deter you, if your expectations out of an investment property exercise are more realistic. At a young age it can be hard to distinguish between, say a pretty property that you ‘like’ because you think it’s a nice place to live yourself, with a property that stacks up well as an investment. Investing is not about that experience – that’s what home buying is for. No, investing is about numbers. Managing your own expectations on how you expect an investment property to look and feel, versus the reality of a property, is one of the first things you need to do. SAVINGS, SAVINGS, SAVINGS   Before you even consider budget and spend range; know this. For under-25’s and especially for under-21’s, a lender will want to see at least 12 months of consistent savings before giving loan approvals. Racking up credit card debts won’t look good either (though if you have one and are paying it off diligently, this might serve you well). Lenders want to see evidence of consistent savings efforts. On this, it is worth considering some government savings incentives currently on offer for first home saver accounts. With these kinds of accounts you are rewarded with government contributions in proportion to the amount you contribute. Do be weary of the terms and conditions with these accounts, however, as some accounts have penalties or restrictions on pulling your savings out earlier than the term date for the accounts. Many lenders offer these kinds of saver accounts in collaboration with the Australian government. Here is a great comparison site for several of these saver accounts. Be realistic about your budget As an extension of the above point; it is unrealistic for an under 25 year old (unless they have managed to secure a very above-average wage for their age) to spend say $500,000 or $600,000 on their first property – home or investment. In fact; odds are most lenders will turn you down. Even if they didn’t, I would not personally spend that much money on a property at such a young age. It is too much of a commitment. If you are a teenager or in your early 20s I’d look at a maximum spend of $200,000 to $250,000 on your first investment property. Securing finance will be easier; and managing the property will be more realistic. This may mean you can’t afford your own backyard Based on a $250,000 maximum spend rate, you will need to assess where you can afford to invest. Odds are, if you currently live within a 20 kilometre radius of Sydney, Melbourne, or Perth, it’s highly unlikely you will be investing near where you live. Challenge yourself to consider towns and cities that aren’t your own, or even within your home state. The key to successful location-sourcing for investment properties is not simply in following trends of ‘hot suburbs’ reported in the media, but on suburbs where the sums add up to produce a viable investment prospect. CAMERON MCEVOY is a NSW-based property investor and maintains a blog, Property Correspondent. By Cameron McEvoyTuesday, 4 March 2014from propertyobserver.com.au

Feb 4, 2016

RENTING VS BUYING: HOW DOES IT STACK UP FOR YOU?

<div> <div> Deciding to make the plunge into home ownership can have many considering whether they’d be more secure buying or renting. There are certainly pros and cons to both. ENTRY AND EXIT COSTS If you’re going to buy a property, you’re looking at paying some hefty entrance costs, and exit costs if you decide to sell. Consider stamp duty, conveyancing fees, building and pest inspections and all the other smaller costs that make up the purchasing journey and you’ll find yourself at an eye watering sum – not to mention removalist fees. When looking to rent, or move to a new rental, you’ll usually be looking at just the removalist costs, and the bond. This upfront cost can have many put off from the get-go, and certainly if you’re going to buy a property you’ll want to make sure you don’t intend to sell it again quickly. RISK AND GAIN Purchasing a home can be a wise investment if undertaken wisely. Unlike those who do not own their homes, you have the potential to achieve capital gains by holding on to an asset. However, you also run the risk of the property dropping in value. While a renter is not in any debt from their home, you will be facing interest and, usually, an amount of debt for a period of time – this ensures there is a level of risk when owning a property. MAINTENANCE As a renter, you don’t need to pay when things break from age or from need of upkeep. Certainly, any damage that you do will need to come from your own funds, but by and large the landlord will pay to keep things in working order. As a home owner, this becomes entirely your problem. Despite this, you’ll find that the maintenance you undertake benefits you directly and you can get things fixed at your own convenience at your own home. As a renter, you largely rely on the accessibility of your landlord to undertake repairs and organise and fixes. IMPROVEMENTS As a tenant, you can certainly ask for, or offer to install, certain things to a property. For instance, fly screens and air conditioning are regularly asked for additions. However, the landlord doesn’t necessarily have to agree to your request. And, you may find yourself either covering the cost or seeing your rent inflated at the end of the term as a result. As a homeowner you can make improvements whenever you want – changing paint colours at a whim, undertaking renovations, changing the garden or whatever it is you feel like. Of course, this comes at your extent, however any money wisely spent may increase the value of the property and in turn may be funds back into your pocket. HOUSEMATES As a home owner, you can rent out one of your rooms to another person for assistance with the mortgage repayments, much in the same way that you can share the cost of renting with someone else. As a renter, you will need to get permission from the landlord or property manager to allow another tenant into the property. As a home owner, you can do as you like. You can also choose exactly who and when people enter your home. While tenants aren’t without some choice, a property manager, with the right notice terms, does have the ability to inspect your property – and you don’t get to choose the tradespeople that do the repairs or the property manager/landlord that you end up with. FREEDOM As a home owner, you can do as you like in your own space. Have pets? Want to smoke indoors? You can do as you choose. In saying this, the freedom of moving on from one property to another can become more limited as a home owner. To afford your initial property, you may find yourself needing to move from a more expensive suburb you can afford to rent in to a suburb that isn’t necessarily your first choice. If your property drops in value, or if you find yourself unwilling to contend with the entry and exit costs, you may face a longer period than you envisioned living in the property. If, however, you are in a comfortable financial position – you may see yourself able to turn the property into an investment and return to renting, or purchasing a separate property as a home. Alternatively, if you’re in a lease you cannot afford to pay out, you will be required to stay within the rental property until the end of the period. You may also find yourself required to move due to increasing rental costs, the investor selling or looking to put a different tenant in the property. Regardless of how diligent a tenant you have been, you can face costs. INSURANCE AND ONGOING FEES Renters are lucky in that the costs they need to contend with can be quite low, with some landlords covering heating and water. While electricity and contents insurance, as well as other fees, fall on the shoulders of renters, other costs do not. Sewerage, rates, strata fees, building insurance – these costs must be handled by the property owner themselves. This can work out quite costly. What pros and cons do you think first time home buyers should be thinking about? </div> </div> <div><em>By Jennifer Duke</em><address><em><abbr title="2014-02-12 23:04:45">Thursday, 27 March 2014</abbr></em></address><address><em>from <a href="http://www.propertyobserver.com.au/forward-planning/advice-and-hot-topics/29657-renting-v-buying-how-does-it-stack-up-for-you.html">propertyobserver.com.au</a></em></address></div>