FAQ’s

If you are buying a property to live in then it becomes a personal choice.

However, if you are buying for investment, House and Land packages in quality estates have been outperforming apartments for decades. In fact, House and Land packages in poor locations have outperformed apartments for decades, especially inner-city high-rise apartments.

Michael Sloan

Largely this is determined by the bank’s assessment of your loan serviceability and your equity, but let’s leave that aside for the moment.

My advice would be to buy again when you are relaxed with your last purchase. What I mean by that is you are so comfortable with owning the last property that you forget about it sometimes. You’re no longer stressed or worried about having bought the property or getting a tenant.

However, make sure you don’t leave yourself in a vulnerable position by using all your available equity to purchase your next property unless you have other funds to fall back on in case of emergency. Also, make sure you fully understand the cash flow and how this will impact on your life and budget before you buy your next property.

Your first step is to meet with one of our approved mortgage brokers, they will show you exactly how much you can spend on the next investment property. Submit a request and we will arrange that for you.

That is certainly something to consider, but it will depend on the layout of the properties and the location of services and so on. Speak with a Town Planner and make sure you research the costs involved.

Keep in mind that it can take up to 12 months to subdivide, as Councils often drag these things out unnecessarily. Having the properties on two titles probably won’t increase your rent return, but it can add value if you want to release equity or sell.

More people buy one property at a time than two, so having the properties on individual titles will make them easier to sell.

The Bendigo council can provide you with more information here.

Michael Sloan

She may be right, that will depend on your personal circumstances, you should understand the pros and cons of buying off the plan and make sure you’re comfortable with them.

For instance, I don’t recommend buying off the plan if your job is not secure unless you can easily get another. You need to be approved for a loan just before the property is completed as any loan approval you obtain now will only be valid for three months.

You can reduce the risk of buying off the plan by making an offer “Subject to Finance” and buy a property that will settle in that three months time frame.

Michael Sloan

Buying with relatives is how many people have started out investing in property. It can have its issues though, mainly because people don’t treat the exercise as a business decision.

If you are going to invest together, my advice would be to make sure you have an agreement in writing. A potential issue is when to sell; one of you may want to use funds from the sale to travel, buy a home to live in or something similar.

Have a written agreement that states you are always allowed ask the other to sell however if their answer is no, that decision is final. Both agree on a date when if one of you wants to sell the property, then it’s sold, and again, no arguments allowed. The first date should be about 5 years from when you buy the property, then maybe every one or two years after that.

You also mentioned that one of you may live in the property later. If you do then you must charge market rent or miss some tax deductions.

If you rent a property at a discounted rate to a family member or friend you must adjust your tax deductions accordingly. Check this with your Accountant. One final word: Always be careful, as buying a property with a family member or friend is a potential relationship breaker.

You should seriously consider an agreement such as this one available from Law Central.

Just make sure you make your offer ‘Subject to Satisfactory Valuation’, and make sure you work with a banker who will tell you what it values at.

Most Real Estate Agents in Armadale are auction mad, so make sure you attend at least 10 auctions in the area before you bid. If you are not confident then use a Buyer’s Advocate to bid for you. Their fees start at 1% of the purchase price if you find the property, more if you want them to source the property and also buy it for you. We can either do that for you or recommend you to a suitable company if you like.

The good news is that the state government has clamped down on underquoting in the industry, you can read more about that here.

Michael Sloan

Both can be valid options, it just depends on your individual circumstances.

The main point is making sure the cash flow works for your situation. I wouldn’t advise anyone to buy an investment property unless they have a weekly surplus in case interest rates rise.

Don’t buy a poor property just because of decent cash flow, and by the same token, don’t buy a good property if it will be a drain on your finances.

The number one thing you have to do here is to understand the cash flow before you buy. Make sure you can afford it even if interest rates rise or your property is vacant for a while.

You can read my National Australia Bank article on this subject here.

Michael Sloan

This is a great question and one I get asked a lot.

Firstly, it helps to have a good accountant to discuss this with. Make sure you have what I call a ‘planning’ accountant – not just one who does your tax.

Secondly, don’t be afraid to sell if it means paying off personal debt. Unless you are selling the property to retire, be careful of selling and not replacing the asset.

For example, if you sell a 400K property today, it would have been worth about 800K in 12 years time (at 6% capital growth).

So, if possible, replace any sold property so you don’t lose the capital gain.

Also, make sure you check with your accountant about the tax implications of selling so you don’t spend the sale proceeds and have a capital gains tax bill you can’t pay.

We have a program called a Mortgage Eliminator, this program will show you how much personal interest you save if you sell an investment property to pay off your home loan. Contact us to have us run this report for you for free.

This is an interesting point. Start by asking yourself what you want to achieve; are you looking at this exercise to get extra rent, or to add value to the property? In either case, it comes down to the numbers. First, let’s look at the sums if your goal is to gain higher rent.

$120,000 at 7% interest will cost you about $161 each week. The interest is tax deductible, so after tax, it will cost you about $110 per week. You will also get further tax breaks from depreciation, but let’s leave that aside for simplicity.

So does this mean you need an extra $110 a week rent to break even? Well no, because you have to pay tax on the rent you receive. That means you need to get about $161 a week extra rent to break even.

Also, keep in mind that this exercise may take you up to 12 months and quite a bit of your spare time. So what is the point if you are only going to break even? To my mind, it would have to be substantially worth your while.

Let’s say after paying the interest on the $120,000 you are in front an extra $100 a week, then is that worth the effort?

That would make you $52,000 over 10 years – not bad! But if you used that extra $100 a week as an extra payment towards the loan on the property you would save $191,000 in interest. Better than not bad!

So my answer is that it really depends on the figures. Speak to your property manager and your accountant and use the calculators on this site to help you make your decision.

If you have gone unconditional on your purchase then the simple answer is No, you can’t cancel this purchase under normal circumstances. If the property has had high capital growth while it is being built the developer may let you walk away as they can then sell it for more.

Ask the question, but it is unlikely they will say yes. I would advise you to speak with a mortgage broker to discuss your options. It may just be a bad valuation, which could be resolved by going to a different bank and getting a better valuation.

Perhaps paying lenders mortgage insurance and borrowing more than 80% of the purchase price may be your solution. I’d recommend calling our office on 03 8413 8888 and booking a free consultation with our Mortgage Broking Service so we can fully understand your circumstances, then we may be able to offer further help.

Not if you keep buying in one State in your name.

It does make sense to buy property in different markets, and not just because of the land tax.

People refer to “The Property Market” in Australia all the time but the fact is there isn’t just one market in Australia, there are many.

I’d advise you to diversify and spread your risk by being in a variety of markets your chance of capital gains is greatly improved. If you don’t like buying sight unseen then do your research and choose a company to help you. We can help investors buy in most other States. Call us for a complimentary appointment to find out more.

You can read more about land tax here.