PROPERTY PORTFOLIO
Noel Whittaker
MAKING MONEY MADE SIMPLE
Paul Bangay
BUYING A FIRST HOME VS AN INVESTMENT MAKING YOUR PROPERTY STAND OUT
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Noel Whittaker: Making Money Made Simple
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Simple Ways To Make Your Property Stand Out
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Paul Bangay: Maximising Space And Design In A Small Garden
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Before You Buy Into Strata
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What’s Best - First Home Or Investment?
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Joint Tenants vs Tenants In Common
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Landscapers To Watch
By Yolanda Regueira
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CONTENTS PROPERTY PORTFOLIO
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Contributors PA U L B A N G AY
Paul Bangay is one of Australia’s most high-profile landscape designers. His working life is divided between Australian and overseas commissions; his spare time is spent at Stonefields, the garden he is building in the country. Paul’s influential previous books, Paul Bangay’s Country Gardens, The Garden at Stonefields, Paul Bangay’s Guide to Plants, Paul Bangay’s Garden Design Handbook, The Defined Garden, The Boxed Garden, The Balanced Garden and The Enchanted Garden, continue to find new readers. In 2001 he was awarded the Centenary Medal for his contribution to Australian landscape design. In 2018 he was awarded the Medal of the Order of Australia for service to landscape architecture. paulbangay.com
Yolanda Regueira is the Conveyancing Manager at Clinch Long Woodbridge (CLW) Lawyers in Sydney, NSW. She specialises in assisting clients with smooth settlement transactions and offers expert advice on all matters of property conveyancing. Yolanda is a Justice of the Peace and has accreditation in the preparation and execution of Powers of Attorney. CLW is a client-focused firm providing a range of legal expertise across specialised areas including property, business, wills and estates, automotive and employment. The team prides itself on exceptional client services and tailored, integrated approach to ensure the best outcome for every client, every time. clw.com.au
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YOLANDA REGUEIRA
N O E L W H I T TA K E R
International bestselling author, finance and investment expert, radio broadcaster, newspaper columnist and public speaker, Noel Whittaker is one of the world’s foremost authorities on personal finance.Noel is one of Australia’s most successful authors, with 20 bestselling books achieving total worldwide sales of more than two million copies. His first book, Making Money Made Simple, set sales records across the country and was named in The 100 Most Influential Books of the Twentieth Century. He is currently an Adjunct Professor and Executive-in-Residence with the Queensland University of Technology, as well as a committee member advising the Australian Securities and Investment Commission. noelwhittaker.com.au
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Editor In Chief Debra Beck-Mewing Welcome to this edition of Property Portfolio Magazine. We’re excited to share this issue with you. The magazine was created to provide you with practical information, ideas and inspiration for your journey towards building a profitable property portfolio. This edition is focused around helping you make property choices, and we’re very pleased to have Australia’s leading personal finance authority, Noel Whittaker, sharing his insights into property investment. Turn to page 7 to learn more about his latest book, Making Money Made Simple, which is an essential read. We’ll also help you consider the choice between home versus investment purchase, and a story on effective ways to make your property stand out to increase value when renting or selling.
Our goal with Property Portfolio Magazine is to support you in making smart choices and help you efficiently achieve financial independence and we hope you will make it your go-to resource.
Rounding out the issue we have included tips on choosing how to manage your outdoor spaces, plus everything you need to know before buying into strata, landscapers to watch and conveyancing expert, Yolanda Regueira explains the difference between ‘joint tenants’ and ‘tenants in common’.
Thanks for taking the time to read it. If you have questions or feedback, I would love to hear it so please make contact with me at
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editor@propertyportfoliomagazine.com
Debra
NOEL WHITTAKER:
MAKING MONEY MADE SIMPLE
Finance expert, International best-selling radio broadcaster, newspaper columnist and public speaker, Noel Whittaker has helped thousands of Australians manage their personal finances for more than 25 years. His clever and witty insights into both global and local economies has lead him to write 20 best-selling books which have changed tens of thousands of lives with his strategies for success. Noel’s easyto-understand and highly effective approach teaches you how to take action and get your money working for you.
Today, we are living longer, government budgets are stretched, and financial markets are increasingly challenging. With all of this in mind, it’s more important than ever to work toward financial independence and ownership of your future. Noel has put together an easy to follow book to help you achieve just this. Making Money Made Simple will guide you through some simple disciplines which can unburden you from a lifetime of financial stress, freeing you up to enjoy all that life has to offer.
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First published in 1987, the book is now in its 24th edition, and the focus still rings true today. With more than two million copies already in circulation, Making Money Made Simple is the quintessential finance guide for those who don’t want to worry about money for another second. “The only thing that is the same about the new book is the name. It has had a full renovation,” Noels says. “A LOT has changed in 32 years. Although it has had plenty of updates over the years, it was time to give it a full revamp.” If you are serious about learning how to become financially independent, retire early or develop passive income from an investment portfolio, Making Money Made Simple is
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an easy read with the investment concepts broken down into simple, practical steps. Noel says his book explores key concepts, such as, the difference between risk and volatility, asset allocation and general budgeting. There’s an introductory guide to share markets, buying your own home, credit ratings and borrowing and also niche investments such as gold, options, managed funds, futures and superannuation. He says that the worst enemy of any investor is ignorance. Getting educated is so important if you are serious about changing your investing game and this begins with who you surround yourself with.
“One of the best tips is to have a mastermind group. They can be family, friends, a peer, just find people that are going to keep you accountable to your goals.” In Napoleon Hill’s book Think and Grow Rich, Hill introduces the concept of the Mastermind Principle. He described the Mastermind Principle as, “The coordination of knowledge and effort between two or more people who work towards a definite purpose in a spirit of harmony…no two minds ever come together without thereby creating a third, invisible intangible force, which may be likened to a third mind”, also known as, the Mastermind. The Mastermind concept was inspired by Hill’s many conversations with the highly successful businessman, Andrew Carnegie, who attributed his entire fortune and success to his Mastermind group and Noel believes this alliance of two or more minds working
together to achieve a common definite objective is an effective strategy to use for financial success. “Meet with them regularly, every month at least, to keep you on track with your goals,” he says. When it comes to the future of property for investors, Noel feels positive. “Ignore all the noise that is out there at the moment. Interest rates are at an all-time low, so if you stick to the ‘buy well and add value’ principle, property investing is still a great choice for investors in today’s market,” he says. “Australia’s population is expected to reach 38 million by 2051. Strong population growth is always good for property, coupled with the current interest rates property still remains a good choice for investors.”
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Noel says that the only factor that pushes up the price of real estate is demand, so his best tip to property investors still focuses on a simple, well-known principle. “Location, location, location. Buy something that is near schools, infrastructure and transport. It’s pretty simple, buy well and add value,” he says. “People would rather live on the beachfront than five streets back from the water and they would prefer to be 10 minutes from work than have a two-hour drive to get there. You cannot change the position of real estate, so it follows that over time, the well-located properties must continue to grow in value if the population increases.” “There is a lot of talk out there about whether to rent or buy. And, there is no doubt that when looking at the numbers on paper, renting seems like the better option. The reason this may not be a great option is that people who rent, often don’t invest the extra cash available and instead take the holiday that they deserve or buy that new car.”
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He explains in Making Money Made Simple that if you are prepared to put in the time and effort to gain the knowledge it takes to choose a good investment property, then it should prove to be a rewarding move. Buying and forgetting about it for years, in the hopes of another real estate boom may result in a troubled experience. His tips to buying a rental property are look for a quiet street, close to transport, shops, schools and with decent fencing and car accommodation. Choosing for your future tenant’s needs, rather than for own is critical. “Don’t let your emotions take over when selecting a property,” Noel says. To kick off your journey toward financial freedom, check out Noel’s expert advice and his collection of invaluable books to get you there. noelwhittaker.com.au
Simple Ways To Make Your Property Stand Out
A little elbow grease and some clever redesigning or re-decorating could be the only thing standing between you and a healthy boost to the sales price of your property. Whether you want to add value to your unit or home, we’ve outlined some simple and effective things to do that will give you plenty of bang for your buck.
REDESIG N You can do a lot with sweat equity if you know what you’re doing. Know your strengths. If you don’t have the skill set or resources to tackle a project yourself, you are definitely better off shelling out a bit more for experts to do the work.
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Interior Designer, New Build Expert, Author and Public Speaker, Frances Cosway has over 15 years’ experience in renovating and building and now specialises in helping people design and build their dream home. She is founder of White Pebble Interiors and author for ‘Your Forever Home’. Frances shares with us her top four ways to improve the value of your property. Paint inside. A home always looks much fresher and brighter when it’s freshly painted. It certainly will stand out from a tired home which is full of buffs and scuffs on the walls. Painting will also enable you to modernise the home with an updated colour scheme. A well maintained and landscaped garden. There’s no doubt that a stunning garden can assist in selling your home, and increase its value. Ensure it’s well maintained, is neat and tidy and free of weeds. Remember your garden is an extension to your home, and acts like another room, so treat it as such and make it lush and beautiful. It can definitely add to the value of the home and makes it easier to sell.
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A modern kitchen. There’s certainly truth in the old adage that kitchens sell homes – so a cosmetic update to your kitchen can definitely add value to your property. There are plenty of ways to improve it aesthetically, without having to rip it out and start again. New splash-back, painting cabinetry or replacing door fronts, can alone make a huge difference. A stone overlay can even be applied to old laminate bench-tops. Declutter. Allow a buyer to visualise themselves in the space, and not be distracted by too much stuff in the home. Keep things simple so others can see their own possessions in the home. whitepebbleinteriors.com.au yourforeverhome.com.au
A FEW MORE SIMPLE IDEAS Vision Board. Create a vision board to stay on track. Whenever you choose an item, whether it’s a tap, a plant pot or a chair, go back and check it against your vision board to make sure it fits the style. The best visions can go rogue if you’re not staying true to it.
Insulation. Look at the insulation, or lack thereof. If you have none either your new buyer or your tenant is going to be stuck with hefty bills. A well-insulated property is more appealing to a buyer or tenant. Kitchen Remodel. Often considered the heart of the home, and you can expect to recoup 60120% of your investment on a kitchen remodel. Just don’t go overboard; you don’t want it to be too fancy for the house or neighbourhood. Deck Addition. Adding a deck increases the resale or rental value of the property as outdoor spaces have become increasingly desirable. Homeowners can expect to recoup 65-90% of their investment with the addition of a timber deck. Cladding. Old cladding can make even the nicest of homes look worn-out. Bankrate.com estimates homeowners can recoup 76% of their investment with the replacement of outdated and worn cladding.
Sustainability. Sustainability is on everyone’s mind as of late. Consider energy efficient windows as old single-pane windows are a turn off to buyers. Adding energy efficient windows is environmentally responsible, your property will be more comfortable to live in and will decrease heating / cooling costs.
R E - D E C O R AT E Simpler ways to bring your property to life and value without breaking out the sledgehammer or jumping through body corporate hoops are just a creative touch away. Coco Republic Interior Design is a national studio specialising in the design and decoration of private residences, hotels, hospitality and development projects across Australia and New Zealand. Here are a few of their tips for styling your home using interior trends to help make your property stand out amongst the crowd.
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Greenery. Coco Republic says that the use of indoor plants is on trend and instantly reinvigorates a space. Indoor plantings soften a space and bring life to interiors. Play with textures and scale with greenery, don’t be afraid to mix foliage or bring large plants inside. Look for Ficus or ‘Fiddle Leaf Fig’, Monstera or ‘Swiss Cheese Plant’, Snake plant or ‘Mother in Law’s Tongue’ and Ficus Elastica or ‘Rubber Plant’. Combine Contemporary With Character. Coco Republic’s clients are looking for cleaner, more edgy styling rather than the traditional ‘Hamptons’ look we have become accustomed to in recent years. This modern contemporary look is achieved with the use of materials like concrete, brick and ‘live edge’ timbers. Black steel features also create a strong and industrial look. In Queensland for example, this is a fusion between our beautiful character-style Queenslanders, contrasted with raw, more modern interiors.
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Lighting. From spectacular wall sconces to dramatic pendant lights, lighting can be the pinnacle element of an interior space. A large chandelier or decorative pendant over the bath is a lovely way of adding a layer of luxury and romance to a bathroom setting. Turn to stunning wall sconces for a dimly lit hallway or to add symmetry to either side of a sofa setting or bed gives a luxurious boutique hotel feel. If you have the luxury of sky-high ceilings, make a feature of them using a bold feature light suspended in an entrance or staircase. A FEW MORE SIMPLE IDEAS... Lighten Up. Painting the walls white or a neutral cream colour will create the illusion of more light and open up the space. Flooring. A major turn off is old flooring in a property. Replace your current flooring with an updated version. A lighter colour will really open up the space.
Upgrade Closet System. A custom closet system is a luxe addition that will really add value. Having space to hide all of your ‘stuff’ away, is an invaluable addition to a smaller property. Artwork. Whether it’s framed prints or textured tapestries, add interest and personality to a space with artwork. Art is one of those things that really makes a property sing.
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Paul Bangay Maximising Space And Design In A Small Garden If you don’t have a large outdoor space to work with, you can still turn your small garden into a paradise - it’s all about the strategy. We spoke with one of Australia’s most high-profile landscape designers, Paul Bangay about his book, Small Garden Design, and how you can make the most of your small garden. Paul was never a stranger to gardening landscapes. His love for gardens started when he was young, in his parent’s garden. “They had a beautiful garden in the Eastern suburbs of Melbourne. I was given a small piece [of garden] and encouraged to landscape as I wished. Later, I took over the vegetable garden and turned it into a picking and highly productive garden space. Learning to garden at such a young age meant the gardening bug never left my system,” he said. Over 20 years ago, Paul wrote his first book about small gardens titled The Boxed Garden. It illuminated ways to add excitement, properly place decorative features, and strategically place plants that transcend the limitations of small spaces. 16
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“I thought given our trend toward smaller spaces, it was time to write a new book on this subject,” he explained, “Many urban dwellers are now living with rooftops, balconies, or small courtyards. Dealing with these small spaces is difficult, and the new book, Small Garden Design, helps overcome many of the obstacles associated with these tight spaces.” According to a consumer survey by Wakefield Research in 2017, 56% of buyers would be willing to sacrifice square footage for more outdoor space. Don’t let a small garden space deter you when considering property, though. According to Paul, small gardens are more intimate and much easier to look after than their larger counterparts. “Creating a gem of a small garden means far less time is needed to
tend to it. If designed well, it can provide you with a sense of enclosure and intimacy that often large-gardens cannot,” he said. PA U L’ S T O P 5 S M A L L G A R D E N T I P S 1. Make the most of vertical spaces and keep them relatively thin, but still with a sense of depth. Creepers on walls do this well. 2. Use mirrors to maximize the sense of space, making sure they are antiqued and not too new looking. 3. Lighting helps make the garden visually connected to the house at night. Often small gardens are close to the house and are visible from windows and doors. Light features create drama from the indoors looking out. 4. Overscale objects and use fewer of them. This makes the space look larger. Don’t use a lot of small objects, such as pots or ornaments as it looks cluttered. 5. Disguise the boundary with planting to make the space appear larger than it is. Seeing the boundary reminds you of the exact size of the space. paulbangay.com
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Before You Buy Into Strata
Finding a strata property you like on the outside is just the first step to ensuring it’s the right one to invest in. Whether you are looking for somewhere to live yourself, or to grow your property portfolio for the future, it pays to be on top of the legal considerations involved in strata management. Strata management resides under complex regulations which tend to vary across the country. Various strata laws have developed over the past 60 years to address the numerous local challenges and changing landscapes as they emerged. Even the language used when describing strata differs between jurisdictions, for example the collective body that manages the apartment complex is known as the Owners Corporation in Victoria, NSW and ACT, but Body Corporate, Strata Corporation, Strata Company or simply Corporation in other states and territories. 18
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No matter where you are in the nation, there are several important investigations you should undertake prior to purchase to ensure your investment is secure. There are three sets of documents you should gather before making your decision to buy, each with a different purpose, but each holding valuable information and insight into what lies behind the apartment building’s walls. Overall, you are looking at the property’s current standing in terms of finances, insurance and safety, tenancy, as well as projected changes. The first essential step is to have a Strata Inspection Report completed, which will answer many of your legal considerations in one document. This is best completed by an independent strata inspector; one who is highly trained and experienced in real estate
There are three sets of documents you should gather before making your decision to buy, each with a different purpose, but each holding valuable information and insight into what lies behind the apartment building’s walls.
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matters and can advise objectively and openly, and who will be able to decipher the complex legal landscape of your geographical area. The other report to request is a building report, which will detail structural issues you need to be aware of, and the third set of useful documents is the latest Annual General Meeting Minutes, Extraordinary General Meeting Minutes and Executive Committee Meeting Minutes. Take your time to sift through the information to gain a clear picture of the true value of your proposed investment. We have put together a checklist of important legal considerations when it comes to purchasing strata. • Ownership Check your strata scheme to determine exactly what you will own. For example, you may own and be responsible for the contents and air space within your apartment, but not the external walls, stairwells, gardens and amenities. • Fees Ongoing fees need to be worked into your own budget prior to signing on the dotted line. Find out what fees and levies apply to your strata living, both for you as the owner as well as any that may impact your tenant if you are investing. • Finances It is wise to look back at least three years into the financial state of the strata, so you have a solid understanding of the financial management process, as well as any proposed or projected spending. You should be able to find a capital fund (previously known as the sinking fund) forecast too, which details projected levy contributions and maintenance over the next 10 years.
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• Upcoming capital works Find out if there are any upcoming capital works on your building, as this could significantly increase your costs and tenancy. In most states and territories, if 75 per cent of the owners agree to works (or sale of the property), the other 25 per cent are forced to agree. • Tenancy and occupancy What proportion of apartments are occupied at any one time? Is your building popular with families, or are young couples and singles the predominant tenants? This will help you market your investment, should you wish to lease it, as well as give you valuable insight into the overall feel of the place. • Neighbourhood report The value of a property can be markedly impacted by the surrounding area, so check out if there are any major developments that could impact your investment, either positively or negatively. It is also helpful to know the demographics and transiency of the area, especially if you are looking to rent out your strata apartment. • Insurance Uncover what exactly is insured by the strata management and what you need to insure yourself. It is also a good idea to determine if the property is adequately insured in the case of disaster or theft, as underinsurance will leave everyone out of pocket. • Safety Thoroughly investigate whether your building complies with state or territory mandated fire safety, health and safety obligations, as well as asbestos
management. Not adhering to these can result in complicated and costly legal proceedings down the track. • Current and past legal matters and defects Find out if there are any current legal matters pertaining to your building that may impact costs, value and tenancy. A property inspection report will also highlight any past or present building defects you should be aware of before spending your money. • Voting rights As an owner, what are your voting rights? The rules and structure of the AGMs vary between jurisdictions in terms of quorums, voting processes and how meetings are chaired. • By-laws It is important to know the individual bylaws pertaining to living in your strata. These cover issues such as parking, noise, renovations and pets. Every state has slightly different by-laws, and the legislations can be quite complex, so it pays to obtain a full copy of those relevant to your area and become familiar with what’s included. • Know who to contact Last but not least, know who your body corporate or strata management contact is. This person will be your go-to in a building emergency, as well as the main contact for arranging meetings. If all of this sounds overwhelming, there are many professionals available to assist in requesting, preparing and deciphering the necessary documents. Don’t skip over your due diligence – ensuring you have the right property will pay dividends for years to come.
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What’s Best First Home Or Investment? by DEBRA BECK-MEWING Trying to decide whether to buy a home to live in or an investment property can be tricky. Of course, the aim should be to own the property you live in at some point but it may be quicker to invest first, and work your way into buying your home as a second or third purchase. Controversial? Well, not these days with the property markets in many popular areas stretching out of reach of many first home buyers. More and more, buyers aim to get into a good property market as quickly as possible and leverage that purchase into buying their home. Get this right and you can have the best of both worlds – rent in your desired location for much less than it would cost to buy the property (and pay off the mortgage), and then invest in areas with good returns, capital growth and potential to build equity through adding value.
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Personal v financial While personal requirements need to come into play and there’s plenty of ways to utilise a home as a stepping stone to financial stability, another approach to consider is ‘rentvesting’ – either as a way to enter the property market, or flat out as a lifestyle.
Strategy one – buy a property to live in Using a scenario where you were aiming to be more realistic than aiming for the Sydney median, and you were targeting a purchase price of $700,000, with a $100,000 deposit this would require a loan of $600,000.
Rentvesting is the term used to describe a situation where an individual will purchase an investment property before buying their own home, and rent where they would like to live.
Note that you would also be required to pay stamp duty of $27,000, and with legal fees this could round out to $30,000 in extra costs, in addition to the $100,000 deposit.
Traditionally, in Australia we were programmed to work towards purchasing a home to live in as soon as possible. However, with the Sydney and Melbourne medians hovering around the $1,000,000 mark, first home buyers need $200,000 just to cover a 20% deposit, let alone purchasing costs which include $40,700 in stamp duty.
Currently, interest rates hover around the 4% mark however your serviceability will be calculated with a buffer of close to 7%. This is the average long term Australian interest rate and banks use this rate in their calculations to protect their security and your ability to repay the loan over the usual loan period of 30 years.
Other capitals are also starting to climb out of financial reach, so, let’s consider the full range of options.
An interest rate of 7% on a loan of $600,000 is $42,000 per year in interest. Usually, you would also pay the principle (the actual $600,000) which we will assume for the first year is $10,000.
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In addition to interest and the principle payment, we need to allocate funds for costs such as building and contents insurance and rates. Electricity, water, phone and other general costs are not included because you would have to pay these whether you were renting or living in your own home. For our example, we will allocate $4,000 to cover costs with the total as outlined in the table below. Item
Amount
Interest
$42,000
Principle
$10,000
Insurance and rates
$4,000
Total
$56,000
That means, it will cost you $56,000 per year to own your own home.
Strategy two – renting For the purposes of a clear comparison, let’s assume you’re now going to rent the same property you were going to buy as your home. Based on a $700,000 price point, the rent could be approximately $600 per week which works out to be $31,200 per year. Comparing the two strategies from a bottom line perspective is as follows. Item
Amount
Purchase a home to live in
$56,000
Renting a similar property
$31,000
Difference = saving
$24,800
It’s important to note that paying your home off does not attract any tax savings, and you pay the interest, principle and expenses out of your ‘after tax’ salary. Taking this into account, you could equate the $24,800 to more than $30,000 in earned income.
Strategy three – rentvesting If you’re renting where you want to live, instead of using your $100,000 deposit to purchase your home you could consider using the deposit to purchase an investment property . . .or maybe more than one. Using a clean example, let’s assume you decide to purchase two properties at a purchase price of $400,000 with a 10% deposit of $40,000. Note: There may be a lenders mortgage insurance (LMI) fee in this instance as usually for anything less than a 20% deposit, the banks require LMI to be paid to cover your risk of defaulting on the loan. Stamp duty on a $400,000 purchase would be in the ballpark of $14,000 in most states, but in Victoria, you would be looking at approximately $20,000, and this needs to be factored into your selection criteria. Using this approach, you would already be ahead when comparing your progress against purchasing a home to live in as you would now have two properties worth $800,000 as opposed to one worth $700,000. In an ideal situation, you should be aiming to purchase property in an area primed for capital growth (good infrastructure, largely owner occupied, established suburb, not in a suburb with all brand new properties bordered by greenfield land) where the rent covers costs. For a $400,000 property, this would mean a rent of approximately $400 or more per week. A best case scenario would be where the rent more than covers costs, and actually delivers cash to you each week. For our example, we will assume the property is neutrally geared, which means it just covers its own costs before tax deductions are considered. This means you would be ahead by $24,800 (the difference between the cost of p r o p e r t y p o r t f o l i o m a g a z i n e . c o m
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purchasing your home as opposed to renting in the same location) and you would hold two properties to the value of $800,000.
Capital growth . . . or not One of the key benefits of buying your home is the potential capital growth uplift. Keeping in mind the point that property prices decrease as well as increase, using a rentvesting approach you can have the benefits of capital growth, plus quite a bit more. For ease of comparison, let’s assume your investment properties have the same capital growth as the area where you had planned to purchase your home. Strategy
Purchase price
After 12 months at 5% capital growth
Purchase home
$700,000
$735,000
Two investment properties
$800,000
$840,000
Assuming conservative and consistent capital growth (which never happens in real life), your investment properties will easily outstrip the performance of your home purchase. You will also have more than $24,800 in cash flow, which can be placed into an offset account to effectively lower the interest payments on your investment properties (remembering that your rent is covering the interest payments on your investment properties).
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Invest v home first – pros and cons Looking over the comparisons above, buying an investment property first stacks up from a numbers perspective. Like all decisions though, there are pros and cons which should be factored into your decision making. Some of these include the points below. PROS • Enter the property market sooner. Investing first allows you to break into the property market sooner with a smaller deposit, as opposed to waiting several years until you are able to afford your dream home. • Live the lifestyle you want. If rental prices allow, you can live in your dream home now and not have to compromise on location or features, and you don’t have to worry about taking on the long-term commitment of a big mortgage. • Build wealth. Investing first allows you to start building your investment property portfolio, which can be used to generate wealth for you and your family in the future. • Save for your dream home. Owning an investment property allows you to save to buy your dream home.
• Financial control. When you’re renting, you can easily upgrade or downgrade to a different home if your circumstances change. For example, if you lose your job or get a high-paying promotion requiring a change of residence, there are no stamp duty expenses or legal costs to worry about.
• You can’t make it your own. Although a rental property might be vastly improved by a renovation project or simply a fresh coat of paint, remember that it’s not yours to tinker with.
• Suburb flexibility. If you’re not ready to put down permanent roots in a particular area, rentvesting gives you the freedom to move around and even travel the world if you wish.
1. Decide whether rentvesting is actually a good option for you. Consider your goals – what are you hoping to achieve? Do you know you want to work towards buying your own home eventually, sooner rather than later, or just never. Yes . . you can change your mind down the track, but it really helps to consider your plan before you think about locations and properties.
• Tax benefits. You can claim interest payments on your investment property loan as a tax deduction. • Choose where to invest. Where you want to live and the best place to buy an investment property often won’t be the same, so rentvesting allows you to be selective when it comes to choosing an investment. CONS • Against the ‘crowd‘. Buying an investment property before purchasing your own home can seem counterintuitive to many people. • Dead money. The old adage that ‘rent money is dead money’ may be a deterrent for some people considering this approach. Hopefully, reviewing the example above will show that in the current market environment, paying interest on an owneroccupied home is an even bigger dead money pit. • You don’t own your home. As much as you may love your rental property, you don’t own it. This can be especially difficult if you form an emotional connection to a house but then the landlord wants you to move out.
Tips for success if investing first
2. Understand your numbers – consult a good mortgage broker and work out all costs including council rates, rental targets, include an amount for insurance and maintenance, along with stamp duty and LMI. 3. Steer clear of property ‘advisors’ who take commissions – you won’t be receiving independent advice and that means you won’t be getting the best possible choices from the market. 4. Buy property that will perform – property that will grow, and ideally will continue to have a pay off such as an older unit block or a property that can eventually be renovated, or rebuilt to accommodate a granny flat, duplex or townhouses. 5. Use a property manager – don’t try to cut corners and manage the property yourself, particularly if you’re new to this. 6. Speak to a property savvy accountant who will ensure you’re claiming the right amount of tax deductions. They should recommend p r o p e r t y p o r t f o l i o m a g a z i n e . c o m
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you have a depreciation schedule prepared for each property, and can advise on structuring your next purchases in the correct entities, for example a trust where appropriate. 7. Manage the admin – this can just be a 10 minute activity once a month, or a detailed process you set up to satisfy your curiosity. While you’re using a property manager to manage the bulk of the management responsibilities, it’s important to keep your eye on your property’s progress. A simple step I take is to check the property management statements monthly and recording the base information in a spreadsheet. In this way I can see the activity over time, and can make a quick call to my property manager if I notice any changes. 8. Set your sights on your next target and prepare to buy again. You can set a target to achieve so you know when the time is right for your next purchase. The best target I have seen is using ratios to determine your next steps. For example set a ‘Loan to Value’ percentage point, and when you reach that point commence the purchase process again
Your Choice – Take Action Ultimately, of course, the choice is yours. The good news is there’s an upside to both options depending on your circumstances. The best advice is to map out your full range of opportunities, fully investigate the upsides as well as downsides, then take action knowing you have given the decision your full attention. Rest assured, you won’t get anywhere sitting on the sidelines. debra@craveproperty.com.au
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“Set your sights on your next target and prepare to buy again.”
JOINT TENANTS vs TENANTS IN COMMON By YOLANDA REGUEIRA
I am often asked what the difference between ‘joint tenants’ and ‘tenants in common’ is. This is an important distinction, as the tenancy in which you purchase a property will have future implications, particularly in the event of one tenant’s passing. In most cases, married couples, family members and couples who have been in a relationship for many years will purchase as joint tenants. However, tenants in common is often utilised where, for example; a couple is in a new relationship or bringing together blended families; tenants are not related or in a relationship; or where there are numerous owners.
W H AT I S T H E D I F F E R E N C E B E T W E E N JOINT TENANTS AND TENANTS IN COMMON? “Joint tenants” means that the registered proprietors, of which there can be more than two, own the property jointly in equal shares. If either of the registered proprietors dies, then the property is automatically transferred to the surviving registered proprietor(s). “Tenants in common” means that each registered proprietor owns a share in the property. These shares do not have to be equal and can be 50/50, 75/35 or any other combination, provided that the shares add p r o p e r t y p o r t f o l i o m a g a z i n e . c o m
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up to 100%. On the death of a registered proprietor, the property does not automatically transfer to the surviving registered proprietors, but the deceased’s will determines to whom the deceased’s share in the property is to be transferred. Often the nomination of tenants in common is not for personal reasons, but for taxation purposes. EXAMPLES OF PROPERTY OWNERSHIP SCENARIOS Tom and Mary are married and own property as joint tenants. Mary passes away. Tom is able to transfer the property into his sole name by lodging a copy of Mary’s Death Certificate, together with a Notice of Death form, at Land Registry Services. John and Margaret are in a new relationship and purchase a home together. As their relationship is reasonably new, they purchase as tenants in common in equal shares (50/50). Some years later John passes away. The property is not automatically transferred to Margaret; instead it is transferred in accordance with the terms of John’s will. Bob and Sue are in a blended family and have been married for ten years. Both have children from previous relationships. By purchasing the property as tenants in common, should either Bob or Sue die, then his or her interest in the property can be dealt with as per their individual will. WHICH OPTION IS THE RIGHT ONE FOR YOU? It is important you consider which tenancy is right for you and what you want to achieve with your share of the property, should you pass away. You should speak to your legal representative and your accountant to get the correct advice. clw.com.au 30
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Landscapers To Watch
Landscaping your front and backyard can add thousands to the value of your property so it should be on your ‘to do’ list rather than an afterthought. Like all fields of design, landscaping and gardening styles are always changing with different ideas, products, and techniques being influenced by lifestyle culture. Here we take a look at eight of Australia’s most on point landscapers whose ideas and influence are making an impact on the industry:
1. Ian Barker Gardens – Landscape Design & Construction Award winning landscape designer Ian Barker is not afraid to shake things up with his unique approach to gardening design. With over 25 years experience under his belt, Ian’s expertise is helping people to design a garden that is specifically tailored to their individual needs. With an emphasis on innovative, yet functional design that caters for the individual, Ian Barber has well established himself as one of Victoria’s leading landscape designers.
2. Phillip Johnson Landscapes Phillip Johnson has been designing gardens for almost 20 years and he is a man on a mission to reconnect people with nature and the ecosystem. He loves embracing the beauty of Australian natives in his garden design and is dedicated to designing gardens that make the very best use of their natural water supply. His design style is all about embracing natural beauty, utilising what is readily available and what flourishes in the Australian climate. He is a landscape designer that sees both the smaller and bigger picture. p r o p e r t y p o r t f o l i o m a g a z i n e . c o m
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3. Anthony Wyer – Wyer & Co Anthony Wyer and his team at Wyer & Co are all dedicated to creating outdoor spaces that embrace the character of the land, compliment the form and architecture of the building and represent the inhabitants of the space. Their signature use of clean, simple layouts are trademark features throughout their design and are leading the way in designing sleek, functional, cleverly executed outdoor living spaces.
4. Kate Seddon Landscape Melbourne-based landscape designer Kate Seddon is a big believer that a garden should be used and enjoyed and this idea resonates throughout her design projects. With a great love and appreciation of plants, Kate strives to incorporate a range of foliage into her garden designs and places a great emphasis on planting design. She also believes in fluid conversations between architects and builders to ensure that the garden is a key element in the design process.
5. William Dangar – Dangar Barn Smith William Dangar is one of Australia’s most pre-eminent landscapers and with a career spanning over 25 years, he has designed and built some of the country’s most iconic residential landscapes. With a background in horticulture, William Dangar is renowned for his no nonsense manner, refined design and detailed aesthetics. He is known for his focus on robust construction, quality materials and elegant design, which can transform any outdoor space.
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6. Mathew Cantwell – Secret Garden Mathew Cantwell is the man behind Sydney-based landscaping company, Secret Garden. This incredibly talented team of over 60 people is made up of a collection of landscape architects, designers, structural landscaping experts, carpenters, stonemasons and horticulturists dedicated to creating unique and usable spaces that allow entertaining and living to transcend the four walls of a property. Cantwell believes that garden design is an integral part of any house design process and should be given the same focus and attention as other areas of home design.
7. Raoul Van De Laak – Good Manors With almost 40 years of experience in the industry and as a founding director of Good Manors, Raoul Van De Laak was a pioneer in the world of landscape design in Australia. He identified very early on in his career an opportunity to change the typical Australian backyard into an entertainment space that could function as an extension of the home’s living space and take advantage of the Sydney weather. There are very few people who know more about pools and pool design than this man. Despite changing trends Raoul Van De Laak maintains a clear vision and focus on creating contextual, relevant outdoor living spaces, pools and gardens focused around the direct needs of the client.
8. Paul Bangay Known for his precise angles, perfect symmetry, strong lines and rich detail, Bangay is known for his ability to create gardens that express timeless elegance and classic simplicity. He has also become well known and respected for his ability to utilise small spaces and to make the most out of even the tiniest rooftops, balconies and terraces.
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