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06 August 2019
Rentvesting is where you rent the property you want to live in, typically in a favoured suburb or location, and then buy an investment property in a suburb you can afford.
It’s an alternative way to getting into the property market and achieving home ownership sooner rather than later.
But just like any investment strategy, you need to look into following Pros and Cons.
Pros
Ability to grow your investment portfolio
If you are smart with your ‘rentvestment’ and the rent you have coming from your tenants is greater than your loan repayments, you will benefit from extra income. You can then reinvest these extra funds elsewhere and use it to grow your property portfolio at a much faster pace than if you were waiting for a property to appreciate in capital growth.
Live where you want, invest where you can afford
Buying your first property in a sought after location can be out of reach for some people, especially if you are a first time buyer. While you are saving up for a deposit to buy a house in your dream location, prices could be increasing at a faster rate than you are able to save. Rentvesting allows you to live in the area you want while buying in an area you can afford, allowing you to enter the property market much sooner using a smaller deposit.
Tax incentives
There are a number of attractive tax benefits that are available to property investors that are not available to owner occupiers. The costs associated with owning an investment property that are tax deductible include advertising for tenants, repairs and maintenance, home insurance, water and council rates and more.
Freedom and flexibility
When you rent, you have the ability to move around as you please, whether that’s to a different suburb, state or country. This ties in well if you live a life where you’re always on the go, or often travel for work or leisure.
Cons
Rent money
When you are renting you are essentially paying off someone else’s mortgage, to a lot of people they see this as a waste of money. If you would prefer to live in the home you are paying the mortgage off of, then rentvesting is probably not for you.
Time consuming
Rentvesting means you are a tenant and a landlord at the same time. You have to make sure your property investment is being looked after by the tenants and stay on top of maintenance requests which can be very time consuming.
You are a tenant
Although you are a landlord to your investment property, you are still a tenant in the property you are living in, which means dealing with rental inspections and the uncertainty of having to leave should the owner decide. The home you live in doesn’t belong to you and is quite often only temporary, plusany changes you want to make to the property will have to go through the landlord. Rentvesting won’t appeal to buyers looking for a long term permanent home.
Miss out on The First Home Owner Grant
The First Home Owner Grant is only available to owner occupier first home buyers who are buying or building a new home, this doesn’t count for investment properties. If you choose to rentvest instead of build a new home, you will forfeit your eligibility for the grant.
Also, when it comes to selling your investment property (unless you have lived in the property for 12 months) you have to pay capital gains tax (CGT) which means paying tax on the profit margin.
To be successful at rentvesting, you need to look at the rental returns and capital growth predictions of a median priced investment property and then compare this to the rental returns and capital growth of more expensive property that you would want to live in.
If you are considering rentvesting, it is important to do your homework. You may also want to consider hiring an agent for advice on where to buy and for help with finding a property.
Kind Regards
John Kemsley
Managing Director
Platinum Realty Group
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31 May 2019
Property investor activity has increased after Scott Morrison’s Federal election victory, with real estate agents reporting they are receiving double the number of inquiries from buyers.
Real estate agents told The West Australian there was an increase in market confidence after the Prime Minister’s election win, with buyers no longer fearful that Labor’s negative gearing policy would cause prices to fall. Under Labor’s plan, negative gearing was to be limited to newly built housing.
Real Institute of WA president Damian Collins said while Labor’s policy had a grandfathering clause which allowed those who were already negatively gearing their properties to be able to continue to do so, it had created uncertainty in the market.
Mr Collins said at his own agency he had double the amount of inquiries this week compared with before the poll.
He said like the rest of the country, “90 per cent” of investors and buyers had assumed Labor would win government which meant its negative gearing policy had a bigger impact on the market than when it took it to the election in 2016.
“It was keeping people out of the market,” Mr Collins said. “We’ve certainly noticed in our office the phones are picking up again.”
He said Mr Morrison’s re-election, combined with APRA’s announcement it could loosen home loan rules — plus the Reserve Bank’s plan to cut interest rates — would likely deliver a “spike” in sales.
ABN managing director Dale Alcock said even though the policy had been limited to established homes it was also putting investors off new builds.
“A lot of people have a healthy mistrust in politicians, so even though Labor had suggested new-build homes would be exempt there was a lot of nervousness,” he said. Mr Alcock said the re-election of Mr Morrison and the recent WA State Government changes to expand their Keystart home loan program would deliver a “shot of confidence” to the property market which ultimately would help prices recover.
Ray White real estate agent Brent Compton also believed confidence was returning.
“Every single person I’ve spoken with is very happy the negative gearing conversations are no longer relevant,” he said.
Kind Regards
John Kemsley
Managing Director
Platinum Realty Group
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11 March 2019
Reviewing your mortgage is being smart with your finances. Why do we do it? Because a reduction in your interest rate, will save you big big $$$ over the term of your loan.
So what does refinancing mean?
Refinancing simply means moving your home loan from one lender to another. And when you refinance to another lender, it’s considered a new loan to them and they’ll often offer sweet deals to bring you over.
Before you decide to refinance, it’s worth looking at what your current lender is now offering because there might be a new home loan with more flexible features that meets your needs.
How do you refinance your home loan?
Often, the first step is to talk to a lending specialist (A Broker) They will outline what’s involved in moving your home loan to the new bank, guide through the process, advise you on where you’ll find the best deals and be on call when you need them.
Once the decision is made to refinance, and your broker has found you the best deal, you’ll need to apply for a new home loan with the lender you’ve chosen (this is all handled by your broker). A valuation of your property will be carried out and you’ll usually need to give them statements on your current home loan, as well as a payout figure. This is the amount remaining on the loan that will be paid out to your current lender.
You’ll also need to organise a discharge with your original lender. This can take a few weeks so should be arranged early. A settlement date will then be agreed between the two lenders to transfer the mortgage title.
Is there any reason I can’t refinance?
There are a few factors that could mean you won’t be able to refinance your home loan.
If you don’t have a low enough loan to value ratio (LVR) there could be insufficient security against the new loan and a lender might not approve it. This would happen if the property value has decreased or a new valuation assigns it at a lower value. In this case, it’s worth talking to your lender to find out what your options might be.
You may also be outside the new bank’s lending policy, or you may not meet the bank’s credit assessment criteria.
The costs of refinancing
Discharge costs
Banks will usually charge a fee for you to discharge your mortgage. The cost varies from bank to bank and usually takes a few weeks to be processed.
Lenders Mortgage Insurance (LMI)
When you refinance your mortgage and your new bank is lending you over 80% of your property’s value, you may need to pay LMI.
Breaking a fixed rate loan
If you’re currently on a fixed rate loan at your bank, you may incur a charge to break that term early. The cost depends on how long is left to run on your fixed term and what your fixed interest rate is. Your current bank will be able to provide an estimated break cost.
Recommendations;
Platinum Realty Group work with our own in house Broker Mr Rob Barton. Rob has a wealth of knowledge and there is currently no fee directly to you for his service.
If you’d like me to put you in touch, please let me know.
Cheers
JOHN KEMSLEY
Managing Director
Platinum Realty Group
9300 4000 | 0419 917 209
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07 February 2019
I support Mortgage Brokers not Banks!
How the findings from the royal commission regarding Broker commissions may affect you;
As it stands; finance brokers currently provide a service where they will assist you “the customer” to find the best lender at the most comparable rate. They typically have access to multiple lenders.
A broker will often place your loan at your own bank at a lower rate than you could negotiate dealing direct with your own bank.
You do not pay the broker, as they currently are paid a fee from the banks/lenders themselves. So this service currently cost the customer nil.
The changes; potential reforms to broker commission are currently being discussed which could result in a blanket ban on commissions being paid by the banks to the broker (upfront and trail) and the introduction of a customer fee-for-service of thousands of dollars to be charged to the customer by the broker. So essentially the customer replaces the bank in paying the fee.
And it gets worse; an alternative proposal is that the customer must pay a fee to deal directly with a bank branch to arrange a home loan.
Taking choice away from customers by ending competition in the home lending market would likely result in:
- Increased fees and interest rates for customers – as banks seek to restore their declining interest margins and increase profit without intense competition to keep prices down
- Diminishing availability of credit – especially for customers in regional and rural Australia, where few branches remain, and for lower income customers with more complex credit needs such as first home buyers
- The end of trade for up to 17,000 small businesses, and the resultant loss of up to 27,000 FTE jobs in Australia
Mortgage brokers are critical to competition in the home lending market in Australia.
If enacted, these changes could make the mortgage broker channel unsustainable, forcing customers back to the big banks, and cutting customer access to smaller lenders and credit. This could result in customer paying higher interest rates and fees.
Show your support by contacting your local Federal MP today.
Kind Regards
John Kemsley
Managing Director
Platinum Realty Group
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06 February 2019
So, you’ve decided it’s time to sell. Here are some important things to consider before you come to market.
Most common options of how to sell; Private Treaty is the most common way to sell a home in Western Australia. This is where you advertise the property at an asking price and then negotiate with the buyer through your real estate agent. When an agreement on price and conditions is reached, the sale proceeds to settlement.
Auctions; make up a small percentage of property sales in WA when compared to the eastern states. Unlike a purchase by Private Treaty, multiple bidders are able to see the competing buyer’s bids at the auction. The auctioneer is ONLY able to sell the property at the fall of the hammer if a bid is at or beyond the reserve price.
Marketing; The next decision to be made is how to promote your property. Here you’ll need guidance from your agent as to what marketing plan would most benefit you to secure the best outcome. A solid marketing plan is essential to ensure all active buyers get a chance at seeing your property so as to enhance competition between buyers.
It’s essential your campaign includes; Professional photography/video, a strong online presents, signboards, buyer databases, electronic buyer profile matching and social media. Home opens will allow buyers the freedom to view the property.
Picking an agent; In selecting your agent its essential that they have local knowledge, a positive attitude and provide a thorough and costed marketing campaign using the very best mediums to showcase your property and its features. Ask them why their plan is the best strategy to ensure your property sells for the highest possible price in the shortest period of time.
Sold; Once your agent has negotiated an offer acceptable to you, you can now sign off in acceptance. Happy days!! you’ll then nominate a settlement agent to act for you through the settlement process.
Settlement: On the day of settlement you usually meet with your agent to hand over keys. Your settlement agent will ensure a smooth transfer of land and funds. It is a busy time but remember to update all your insurance policies.
All the best 🙂
Kind Regards
John Kemsley
Managing Director
Platinum Realty Group
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27 September 2018
How to get equity out of your property to fund an investment property
Tapping in to home equity to fund investment properties has become a common strategy for savvy property investors. If done well, it can create some amazing opportunities. However before you dive head first into the investment property world, it is imperative to understand how equity works and what you can do to get the most out of this valuable asset.
Equity is calculated by taking the market value of your property and subtracting the amount you still owe on your loan. For example, if your home is valued at $500,000 and the amount owing on your loan is $200,000, your equity in the property is $300, 000.
Your home’s market value is an important element in your equity calculation. If the value of your property goes up, you instantly have more equity to play with.
Equity-building ideas for your home
There are ways in which you can actively increase your home’s market value and build up your equity. Possibilities include, home renovations, regular maintenance and a natural appreciation in price. You can also increase the value of the equity in your home by reducing the size of your home loan.
Let’s explore these ideas further;
- Renovations to create value: Make sure you pick projects with the highest return on investment such as kitchens and bathrooms. Every cent you spend will count so think about your projects wisely.
- Regular upkeep: A home that has been left to deteriorate will lose its value in the market. Regular updates and keeping on top of all the little things such as gardens, ceilings and general home maintenance will help maintain your home’s value.
- Rising market prices: The value of your home may appreciate naturally over time with very little input from you. Keep in mind that the reverse can also happen.
- Increasing monthly payments: Every dollar you pay off from your loan reduces your debt and hence increases your equity – just make sure your lender applies those payments to the principal.
- Make additional lump sum payments: Again the aim is to reduce the size of your debt which will lead to an increase in equity.
Purchasing property using equity
Accessing the equity in your home is a fantastic way to grow your real estate portfolio. Equity can be used as a deposit for an investment property, to pay for renovations or provide you with the option to go the next price point. However, like all major life purchases there are a few things to consider when harnessing your home equity for investment in property.
The four most important things you should consider when making investment purchases:
- Take into account the expected rental income of your new investment property verses the mortgage repayments. This will determine whether your investment in Negatively – Neutrally or positively geared.
- Be realistic about the costs and risks associated with real estate purchases. Make sure you have a budget (and buffer) in place for things like settlement fees, rates and stamp duty.
- Only release the equity you need and free up any excess for other investments.
- Make sure you have enough equity left to deal with some of those curve balls life sometimes throws at you. As tempting as it may be to use all your equity to achieve your real estate goals even quicker, it makes sense to have resources behind you when things don’t go to plan.
To find out more about how you could use your home equity to work harder for you, contact any of our team at Platinum Realty Group
http://platinumrealtygroup.com.au/about-platinum/meet-the-team
Or contact me direct on 0419 917 209.
John Kemsley
Managing Director
Platinum Realty Group
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31 August 2018
You’ve decide to sell your home so I guess you should just pop up a For Sale sign and wait for a buyer? Ha! In reality the sale process involves a little more than that, however if you take the time to understand the steps involved, the selling process can be relatively straightforward, stress-free and dare I say?…..enjoyable!
Below is a step by step guide to effectively and efficiently sell your home without forgoing your sanity!
One: Have a plan
Think about the end result. When you do sell, where are you going to move? Are you buying before selling? Will you rent? Go on a holiday? What will you do once the new buyer signs the dotted line? It’s important for you to think beyond the sales process to ensure you remain cool, calm and collected once the deal is done.
Two: It’s Agent time
Selecting the right agent will be one of the more important decisions you have to make so make sure you put in some time to research. Check out your local agents, look at their results, meet with them and work out who you think will help present your property in its best light.
Three: How do you want to sell and how much for?
Alongside your agent you will work out the best way to list, show and sell your home. You will also need to determine the price. Now I’m all for Big Hairy Audacious Goals but it is important in this step to maintain a sense of reality. Look around at your market and set a price that is realistic for your home and location. Your agent’s local knowledge will be instrumental here so make sure you let them work their magic and trust their judgement when it comes to price setting.
Four: Enter the Legal Eagles
It’s time to sign your life away….no, not really, just an agreement with your chosen agent!
Five: It’s show time
Advertising, Internet, photos and showings are the next phase of the sales process. This is when you need to step up the plate and make your house sparkle to maximise the impact to your prospective buyers.
Six: Negotiate, negotiate and negotiate again
We are one step closer to that For Sale sign going up. Your Agent will play an integral part here in mediating between you and the prospective buyer to determine a sales price. Once an amount is agreed to, a deposit will be paid.
Seven: Officially under contract
You’ve agreed to a price, the deposit has been paid so now is the time to call in the settlement agent and the banks to ensure all t’s are crossed and I’s dotted.
Eight: Settlement day!
This is it, pop the champers and stick the giant SOLD sticker up. Sale complete! ‘gone’ are any legal rights to the property and ‘in’ is a healthy new bank balance as the final payment is made.
If you have any questions about the selling process or want to know more about recent sales in your area, contact any of our team at Platinum Realty Group; http://platinumrealtygroup.com.au/about-platinum/meet-the-team
Or contact me direct on 0419 917 209
John Kemsley
Managing Director
Platinum Realty Group
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10 December 2014
You might think it seems like an easy decision… renovate and then make lots of money right! But renovating for profit is not that simple.
There are a number of ways you can add value to your property through renovation.
What is true is that renovating a property can bring you profits, even in a flat market. Renovating is about bringing a fresh new look, feel and design to a tired old property. If planned well – you can make really good money to put towards your next property or pay off your home loan faster.
Here are some factors to consider when renovating for profit
- You need to consider the area that the property is located in – as I always say – buy the worst house in the best street or best suburb
- You could consider getting a real estate agent in to give you some facts and figures on the suburb, property types and values in the area – they will also be able to give you some guidance on how you can add value
- Don’t buy with your heart – if the house is not for you – then get your head making the decision not your heart
- Don’t over capitalize – make sure you have a decent renovating budget in mind and an achievable growth figure and stick to it
- Be prepared to get your hands dirty – the more you can do yourself, the more money you will save. For example if you can remove tiles yourself and demolish a bathroom you can save hundreds of dollars in labor
- Get a specialist in when you need one – things like tiling, plumbing, electrics and possibly even painting can be best left to the professionals
- Add a bedroom whenever possible. You can add serious dollars to your property by adding a room – for large rooms, consider adding a partition or turning a nook into a study
- When you get quotes, get at least 2 per task (utilize your feiends network and ask around for good LOCAL suppliers. Make sure each supplier quotes on exactly the same item – apples for apples!
- Watch some TV – by that I mean watch the renovation shows that are all over our screens like the BLOCK – you can get some great tips and ideas from these shows
- A good budget figure to work to is 10% of the purchase priced of the house
- Allow a minimum 10% contingency on top of your budget – maybe even 15%
Remember, always focus on your end audience! Who are the people who are going to buy a house like yours and in that suburb – then make sure you provide a solution that suits them.
Here is a scenario for you.
Say you are looking at a property in a suburb where the median price for a 4 x 2 is $550,000 – (this is for an average property in the area – a well renovated property might sell for $575,000). You have found a run down property on a big block for $450,000, then you need to add your purchase fees including stamp duty – I would allow around $15,000 to cover everything. The purchase price is $465,000 now.
You then allocate a budget of $40,000 which you want to cover the following items:
New kitchen, bathroom, new flooring, window fittings, painting throughout plus landscaping and the front facade. Then add in your contingency of $4000.
Your new purchase price is $509,000.
If you then sell the property for the median price in the area – you would make a profit of $41,000 less selling fees of around $12,000 – so total profit of $29,000. If you can sell it for the price of a good renovated property in the area – you could make up to $54,000. Now that’s not a bad days work… or lets say 3-6 month work.
You do need to factor in mortgage repayments too over the time you hold the property for renovation.
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05 December 2014
Staying on top of your weekly finances can be a big task. You have to consider your grocery items, car, petrol and travel expenses, health, rent or mortgage, school and other costs if you have children and then there are the costs associated with your lifestyle and holidays.Here are some great tips to help you plan your budget and save some money.
Budget Planning Tips
Start by writing down all of your known expenses into a spreadsheet – this should include absolutely every known expense like
- Rent or mortgage payments
- Council fees
- Groceries
- School or study fees
- Gas, water and electricity
- Rates and taxes
- Medical/dental fees and private health
- Insurances
- Car and petrol or public transport
- Holidays
- Clothing and personal care like hairdressing etc
- Add in a contingency or miscellaneous budget for unforeseen items like birthdays, gifts, urgent medical, leave a good amount of Christmas too
- Automate as many payments as you can – that way – you are less likely to forget payments and
- Look at ways to do salary sacrifice or payments into your superannuation to reduce your taxation
- Start a savings account if you can and add to it regularly – even a direct deposit from your pay each week – even if its just $25 or $50 can all add up
- Determine your weekly income and deduct expenses – this leaves you with your spare cash. If you do not have spare cash – you need to look at ways of saving money
Saving Tips
- Get a mortgage health check – you could save thousands over the term of your loan by reviewing your bank and rate and repayment structure
- Look for special offers on gumtree and sell unwanted items on gumtree or ebay – you will be amazed at who might want your items that you no longer need and that you can grab a great bargain’
- Start a veggie patch – great fun and plenty of fun ways to add some colour to your meals
- Buy a deep freeze – if you buy items in bulk – you can save lots of money every week by shooing smart
- Do your shopping for groceries on line – its amazing how much less you buy when you are not tempted by the packaging, your hunger or your kids
- Do regular maintenance on the home eg scale the clean the cofeee machine, empty the gutters etc – this will prolong the life of things like machinery and reduce emergency repairs and big call out fees
- Shop at the right time of year – wait for the sales or buy ahead if you can (only what you need though)
- Look for specials on items you buy regularly – especially big cost items or regular purchases – but in bulk if you can store it
- DIY – that’s right – do it yourself or have a go – Bunnings and Masters have great classes and courses to give you some tips on how to do things
- Then there are the little things like spend less time in the shower, keep reticulation to the recommended minimum, turn off taps properly, shut doors, turn off lights, wash clothes in cold water, try not to use your dryer
Our final tip – stay away from the shops if possible – an outing to the shops will cost you money! Try packing your own snacks and head outdoors to the beach or park.
Good luck and start planning today!
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03 December 2014
Why should you consider a real estate blog?
There are some serious bloggers out there and there are some serious real estate business owners out there. I’d like to think that I’m pretty good at both.
The Real Estate Industry has become very competitive over the years and operates in an ever changing world of digital and on-line communication.
Traditional marketing strategies for business promotion and for personal selling still focus on the basics – good old fashioned communication, regular contact, local area knowledge, a network of contacts and the ever ‘not-so-popular’ door knocking.
In todays’ modern world, you need to stand out – everyone is shouting and vying for your attention so you need to think of some ways you can create an edge and a point of difference.
I first started investing at the age of 16, had a lucrative career in the building industry and I ventured into real estate sales in 1996. I started my own office shortly after in 1999 – opening a new Professionals office. I re-branded to Platinum Realty Group when I felt the need to take the business to the next level.
I needed to reach out to our audience in my own style, focus on modern communication and continue to develop our on-line presence alongside our daily sales training and mentoring.
Having a real estate blog allows me to share information to the public in a ‘non-selling’ way which I really enjoy. I don’t have a house to sell, or Property to rent out or a development to offload. Its just purely about information sharing and becoming known as a safe place that the public can go to for good information related to the real estate industry.
You can also have a little bit of fun, brand into other industries and share greater knowledge.
The Benefits of a good real estate blog:
· Develop a reputation as a person or brand with good product knowledge
· Establish your business as an industry leader
· Share greater insights into the industry with the public
· Draw traffic to your on-line profiles – including your website, facebook pages, twitter account, Linkedin profile etc
· Increased traffic means you start to pop up more on searches, therefore you stand out more – better SEO
· Provide one source of information in one easy to find place – it’s like an on-line encyclopedia
· Connect people to your business
· Help convert traffic to leads
· Build a network
There is so much more to share so I hope you look forward to my next blog. It would be great to have a chat anytime or hear your feedback so feel free to get in touch any time
John Kemsley
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