Dean Parker
Property Investing
About Me
2002 • • • • • • • •
Recently engaged to my fiancé Elise Dean - IT Systems Analyst Elise - IT Software Consultant 2 cars <$50k each - both financed Renting in Southbank Melbourne Property portfolio value - $0 Had no property experience Looking for a way to buy our first home
Today • • • • • • • •
Husband and wife team + 2yo daughter Dean - Full time investor + business owner Elise – Business owner + full time Mum Olivia - FUN 2 cars > $50k each - neither financed Own a house on 1100sqm in Woolloongabba Property portfolio value - almost $10M Have extensive property experience
Having a crack • Involved in 454 property transactions (Over 14 years, 1 transaction every 11 days)
• Transacted over $160 million • Renovated 218 dwellings (15 properties per year)
• Developed 153 new dwellings • 51 new dwellings in development • Also done rooming houses, retail, NZ
The Dreamâ&#x20AC;¦
The Realityâ&#x20AC;¦
About YSH • Property Development • Apartments • Townhouses
• Property Investment • Residential • Commercial
• Property Management • Personal properties • Clients properties
• Property Education • Investing • Renovation • Development
Questions?
My Goals for the Day To leverage form my experience to provide you with the knowledge and tools in order for you to: • Ask better questions • Avoid costly mistakes • Understand the process • Become a more sophisticated investor • Have success with your property investing
About You?
Questions • • • • •
How many investment properties do you own? How long have you been investing in property? How have your properties performed? What has held you back from increasing your portfolio? Do you invest in other assets (shares, business, etc)?
Six Step Process
1
2
3
Prepare Yourself
Find a Location
Find a Property
4 Purchase
5 Management
6 Refinance / Sale
Step 1: Prepare Yourself
Prepare Yourself: Mindset
Mindset • • • •
Are you living the life you desire? Do you have enough time? Do you have enough money? How much more time do you want? • Eg. 3 day week-ends, not work at all
• How much more money do you want? • Eg. Pay off house,
• How much money do you need / year?
Prepare Yourself: Activity / Handout
Mindset • What education do you have? • How much free capital do you have? (Savings, shares, investments, home equity) • How can you create more time (less time travelling, work from home, cut back hours) ? • Do you have other commitments (kids, religion, family, sport) ?
Mindset • • • • •
How would you rate your financial knowledge? Where do you prioritise investing? How would you rate the state of your personal finances? Are you a saver or spender? What level of commitment do you have?
Mindset – Joint Ventures • What appetite for risk do you have? • How comfortable would you be in asking a family member or friend for money? • How comfortable would you be in asking a stranger for money?
Why? • What do you want to achieve from your investing? • More money or time?
• For things to change, first things must change: • What is going to change in your life? • Reduce expenses • Create more time
Questions?
Prepare Yourself: Understanding the Basics
Understanding the Basics • • • • • • • •
What is property investing Active v Passive Types of property (residential, commercial) What is rental yield Factors that influence long term capital growth Factors that influence property prices Property Investing is all about the Numbers – income v expenses Positive cash flow v negative gearing
Questions?
Prepare Yourself: Case Study
Case Study #1 – Buy & Hold • • • • • •
2br apartment, 2 bathroom apartment in Woolloongabba Boutique block of 22 Just around the corner from our house Passed in at Auction Potential to buy under value High rental demand
Case Study #1 – Research • • • • • •
Location: Around corner from where I live, so know the market Location: 1.5km from CBD, good suburb, quiet street Location: +ve: hospitals x 2, CBD, medical precinct, Southbank Location: -ve: Site beside has planning application for 12 storeys Property: Price research, sinking fund $120k Management: manage ourselves
Case Study #1 â&#x20AC;&#x201C; Price Research
Case Study #1 â&#x20AC;&#x201C; Price Research Street Address 1/6 Lockhart Street 2/6 Lockhart Street 3/6 Lockhart Street 4/6 Lockhart Street 5/6 Lockhart Street 6/6 Lockhart Street 7/6 Lockhart Street 8/6 Lockhart Street 9/6 Lockhart Street 10/6 Lockhart Street 11/6 Lockhart Street 12/6 Lockhart Street 13/6 Lockhart Street 14/6 Lockhart Street 15/6 Lockhart Street 16/6 Lockhart Street 17/6 Lockhart Street 18/6 Lockhart Street 19/6 Lockhart Street 20/6 Lockhart Street 21/6 Lockhart Street 22/6 Lockhart Street
Bed 1 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 2 2 2 2
Bath 1 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 2 2 2 2
Car 1 0 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 0 2 1 1 2
Sale Price $385,000 $480,000 $490,000 $495,000 $490,000 $496,450 $505,000 $475,000 $515,000 $480,000 $510,000 $480,000 $485,000 $500,000 $525,000 $499,000 $495,000 $453,000 $495,000 $495,000 $495,000 $505,000 $493,498
Sale Date 21-Sep-09 27-May-10 29-Sep-09 23-Feb-10 16-Feb-10 22-Dec-10 25-Mar-11 8-Oct-09 15-Jul-14 17-Sep-09 8-Jul-15 16-Sep-09 19-Feb-11 28-Jan-16 24-Feb-15 5-Jun-15 3-Feb-16 18-Dec-17 19-Jan-17 21-Sep-09 18-Feb-10 19-Feb-10
Case Study #1 – Offer • • • • • • •
Offer at $420,000 They came back at $429,000 and we accepted $66,000 (13%) less than they paid $64,500 less than the average sale price Replaced floor coverings throughout Installed some better blinds Full builder’s clean
Case Study #1: Settlement Costs Numbers: Purchase Price Legal Fees Gov Fees (Stamp Duty) Discharge of Mortgage Bank Chq Adj (Rates, BC)
$ 429,000 $ $ $ $ $
2,385 13,480 -175 40 762 $
16,492
Case Study #1: Renovations Renovation Costs: Acoustic Report Acoustic underlay Timber Floor inc install Carpet inc install Blinds inc install Skirt repair and paint Toilet seat & full clean
$ $ $ $ $ $ $
550 694 5,364 1,285 481 506 324
$ 9,204
Case Study #1: Settlement Costs Price Acquisition Renovation Holding Total
Total $429,000 $16,492
Cash / Eqty $85,800 $16,492
Bank $343,200 $0
$9,204 $0 $454,696
-$9,204 $0 $111,496
$0 $0 $343,200
Case Study #1: Holding Costs Income: Rent @ $460/wk
$ 23,920
Rental yield on Price = $23,920 / $429,000 = 5.6% Rental yield on Cost = $23,920 / $454,696 = $5.3%
Case Study #1: Holding Costs Expenses: Bank P&I repayments Ownerâ&#x20AC;&#x2122;s Corp Management Fees @ 8.8% Advertising Smoke Alarm (SMS) Landlord Insurance (TS) Water Rates ($183.60/qtr) Council Rates ($393.95/qtr)
$ 21,240 $ 4,456 ($85/wk) $ 2,105 $ 300 $ 79 $ 328 $ 734 $ 1,576 $ 30,817
Case Study #1: Holding Costs Income less Expenses Cash Flow Loss
$ 23,920 $ 30,817 $ 6,897
($132/wk)
Questions?
Prepare Yourself: Accounting & Tax
Accounting • • • • • •
Tax Types of structures Why to use them How to choose Depreciation Thanks Mark Unwin from MJ Unwin and Associates!
Tax Rates
Investor v Trader Property Investor – intent to hold property for long term growth: • Buy and hold • Buy renovate and hold • Build and hold
Capital Gains Tax Capital gains tax applies to investors. The calculated capital gain (profit) is included as income on your tax return. Tax is payable at your marginal rate, it is not a â&#x20AC;&#x2DC;separateâ&#x20AC;&#x2122; tax.
Capital Gains Tax Key points: - 50% of the profit is tax free provided: - Held for more than 12 months (contract date) - Capital gain taxed in an individualâ&#x20AC;&#x2122;s name
- Assessable at contract date, not settlement date. - Capital losses can only reduce capital gains, not ordinary income.
CGT Example Property Cost Base details include: Purchase Price Stamp Duty Legal fees on purchase Pest & Building Inspection Finders Fee Initial Repairs Renovation Costs Commissions on sale Legal fees on sale Total Cost Base
$500,000 $ 25,070 $ 1,200 $ 880 $ 6,000 $ 5,000 $ 25,000 $ 14,800 $ 1,350 $579,300
CGT Example Sales Price -
$740,000
Less: Cost Base Add: Depreciation claimed
($579,300) $ 28,000
Profit on sale of property
$ 188,700
50% Assessable if held for greater than 12 months
$ 94,350
CGT Example
Questions?
Investor v Trader Property Trader – short term profit making intention: • Flip • Buy, renovate and sell • Buy, subdivide and sell • Build and sell
Tax for Property Traders • The taxing point is settlement date (income tax and GST) • No discount applies regardless of whether you hold for more than 12 months • Holding costs such as interest, rates and overheads are claimed as a deduction in the year incurred. • Profit is calculated on a per property basis, not cash flow. (Example – build 3 but only sell 2) • No Place of Residence exemption if deemed a trader.
Questions?
Structuring • By structuring, you are protecting your investment from potential creditors in the event of litigation. • A MUST for anyone running their own business or operating in high risk areas of work (i.e. doctor, lawyer). • Beware – a structure can still be sued.
Structuring - To Reduce Tax • Structure can legally help reduce your income tax on investment income. • Potential to distribute income tax free to children and non working partners. • Potential to cap maximum tax on investment income at 30% instead of 47%.
Structuring - With Others • Using a structure is the easiest way to invest with other people (related or not). • Structure helps protect your other investments. • Can be wound up once project completed.
Structuring – When? • Be pro active and talk to your accountant before purchasing a property. • Most States now allow you to setup a structure after signing the contract with the use of ‘and or nominee’ clause. Not QLD! • Double stamp duty can apply if not done correctly or changes made to property or structure. Check with your solicitor • Just because the person next to you has a trust, doesn’t mean you should! Talk to your accountant.
Structuring – Types? • • • • •
Individual Partnership Trust Company Superannuation Fund
Structuring - Individuals Pros
Cons
• Already established • Convenient & Simple • Losses can be offset against other income • Access to 50% Capital Gains Tax discount
• No flexibility • Asset protection limited to insurance • Potential tax rate of 47% when income over $180K
Structuring - Partnership Pros
Cons
• • • •
• Joint and several liability • Partnership income must be declared based on ownership %
Cheap to establish Income splitting helps minimise tax Pooling of resources Potential access to 50% CGT discount • Can be a mixture of entities
Structuring - Trusts Pros
Cons
• Asset protection • Flexible income splitting • Potential access to 50% CGT discount
• • • •
Setup and ongoing costs Complicated Losses trapped within trust Higher land tax rates in most States
Structuring - Company Pros
Cons
• Asset protection due to limited liability • Tax capped at 30% or 27.5% if Small Business entity
• Setup and ongoing costs • No CGT discount • Losses trapped within entity
Structuring - Superannuation Fund Pros
Cons
• Maximum tax rate 15% • Capital gains tax rate10% (1/3rd discount) • At retirement, earnings and pension drawn is tax free *when under
• Restrictions on borrowing • Cannot access money until retirement • Highly regulated • Expensive
$1.6 m balance
Questions?
Prepare Yourself: Banking & Finance
Banking & Finance • • • • • • • •
Deposits and serviceability State of the finance market? Easy to get loans or hard? Banks or brokers? How to apply for finance How do banks process your application How does structuring impact my finance application Do you understand how to release equity? Should I get pre approval?
Finance Changes
Living Expenses Household Expenditure Measurement (HEM) , Henderson Poverty Index (HPI) , Current Index* Household Segments
HPI
HEM
Current*
Annual Increase
Single - No Dependents
$1,250
$1,105
$2,000
$9,000
Single - 1 Dependent
$1,717
$1,430
$2,800
$12,996
Single - 2 Dependents
$2,159
$1,560
$3,600
$17,292
Single - 3 Dependents
$2,601
$1,889
$4,400
$21,588
Couple - No Dependent
$1,817
$2,032
$3,000
$14,196
Couple - 1 Dependent
$2,284
$2,583
$3,800
$18,192
Couple - 2 Dependents
$2,726
$2,704
$4,600
$22,488
Couple - 3 Dependents
$3,168
$3,137
$5,400
$26,784
Renovations: Cosmetic
Renovations: Cosmetic
Renovations: Cosmetic
Renovations: Advanced
Renovations: Advanced
Renovation: Case Study #1
Renovation: Case Study #1 Numbers: Purchase Price Acquisition Costs Renovation Costs
$ 760,000 $ 45,000 $ 450,000 (59%)
Renovation: Case Study #1
Renovation: Case Study #1 Numbers: Purchase Price Acquisition Costs Renovation Costs Holding Costs Selling Costs Sale Price Approximate Loss
$ 760,000 $ 45,000 $ 450,000 (59%) $ ??? $ 18,000 $1,273,000 $ 810,000 $ 463,000
Questions?
Renovation: Case Study #2
Renovation: Case Study #2
Renovation: Case Study #2
Renovation: Case Study #2
Renovation: Case Study #2
Renovation: Case Study #2 Numbers: Purchase Price Acquisition Costs Renovation Costs Holding Costs Selling Costs Sales (+ rent $14k) Actual Profit
$ 601,000 (adv. for $579k) $ 34,435 $ 212,732 (35%) $ 58,043 $ 31,146 $ 937,356 $1,217,462 $ 280,106
Renovation: Case Study #2 Increase in Value: Purchase Price $ 601,000 Sales $1,203,000 Increase in Value $ 602,000 (100%) Return on Costs: Renovation Costs $ 212,732 ($2.84) Cash on Cash Return: Profit $280k รท Cash Req $347k = 121% (annualised)
Questions?
Renovation: Case Study #3
Renovation: Case Study #3 Price Acquisition Renovation Holding Total Valuation Total
Actual $83,000 $3,000
Cash -$16,600 -$3,000
Bank -$66,400 $0
$15,000 $0 $101,000 $120,000
-$15,000 $0 -$34,600 +$29,600
$0 $0 -$66,400 -$29,600
-$5,000
-$96,000
Renovation: Case Study #3
Renovation: Case Study #3
Renovation: Case Study #3
Questions?
Intro to Developing
1 Gumdale Place, Sebastopol Income Rent ($220/wk @ 4 rooms)
Annual $ $
45,760
Bank Interest (Loan $200k)
$
11,000
Cleaning ($77/fn)
$
2,002
Gardening ($30/mo)
$
360
Insurance (Landlord / contents)
$
350
Internet ($130/mo)
$
1,560
Management Fees (6.6%)
$
3,020
Letting Fees ($220 x 4)
$
880
Owners Corp (inc Insurance)
$
800
Compliance (Council / Cons Aff)
$
700
Rates (Council / water)
$
2,650
Utilities - Electricity
$
3,200
Utlities - Gas
$
2,200
Utilities - Water
$
300
Total Expenses
$
29,022
Profit
$
16,738
Expenses
Prepare Yourself - Summary • • • •
I have determined how much I have to invest I have determined why I am investing (growth or income) I have determined whether I wish to be passive or active I have spoken with my accountant and received advice specific to my situation and have determined which structure to use • I have spoken with my bank / broker and worked through a pre approval process to determine how much I am able to borrow • I know how much I have to spend on my property/s
Step 2: Finding a Location
Finding a Location: State
Location – State • • • • • •
Median House Prices Relative affordability Population growth Population growth projections Economic Outlook Levels of employment
SYD MEL BRI ADE PER CAN HOB DAR
Source: REIA
Feb-18
Sep-17
Apr-17
Nov-16
Jun-16
Jan-16
Aug-15
Mar-15
Oct-14
May-14
Dec-13
Jul-13
Feb-13
Sep-12
Apr-12
Nov-11
Jun-11
Jan-11
Aug-10
Mar-10
Oct-09
May-09
Dec-08
Jul-08
Feb-08
Sep-07
Apr-07
Nov-06
Jun-06
Jan-06
Aug-05
Mar-05
Oct-04
May-04
Dec-03
Jul-03
Feb-03
Sep-02
Apr-02
Nov-01
Jun-01
Jan-01
Aug-00
Mar-00
Median House Prices ($'000s) by State
1400.0
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
SYD MEL BRI
Source: REIA
Feb-18
Sep-17
Apr-17
Nov-16
Jun-16
Jan-16
Aug-15
Mar-15
Oct-14
May-14
Dec-13
Jul-13
Feb-13
Sep-12
Apr-12
Nov-11
Jun-11
Jan-11
Aug-10
Mar-10
Oct-09
May-09
Dec-08
Jul-08
Feb-08
Sep-07
Apr-07
Nov-06
Jun-06
Jan-06
Aug-05
Mar-05
Oct-04
May-04
Dec-03
Jul-03
Feb-03
Sep-02
Apr-02
Nov-01
Jun-01
Jan-01
Aug-00
Mar-00
Median House Prices ($'000s) by State
1400.0
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
SYD Linear (SYD)
Source: REIA
Feb-18
Sep-17
Apr-17
Nov-16
Jun-16
Jan-16
Aug-15
Mar-15
Oct-14
May-14
Dec-13
Jul-13
Feb-13
Sep-12
Apr-12
Nov-11
Jun-11
Jan-11
Aug-10
Mar-10
Oct-09
May-09
Dec-08
Jul-08
Feb-08
Sep-07
Apr-07
Nov-06
Jun-06
Jan-06
Aug-05
Mar-05
Oct-04
May-04
Dec-03
Jul-03
Feb-03
Sep-02
Apr-02
Nov-01
Jun-01
Jan-01
Aug-00
Mar-00
Median House Prices ($'000s) â&#x20AC;&#x201C; Sydney
1400.0
1200.0
1000.0
800.0
600.0
400.0
200.0
0.0
MEL Linear (MEL)
Source: REIA
Feb-18
Sep-17
Apr-17
Nov-16
Jun-16
Jan-16
Aug-15
Mar-15
Oct-14
May-14
Dec-13
Jul-13
Feb-13
Sep-12
Apr-12
Nov-11
Jun-11
Jan-11
Aug-10
Mar-10
Oct-09
May-09
Dec-08
Jul-08
Feb-08
Sep-07
Apr-07
Nov-06
Jun-06
Jan-06
Aug-05
Mar-05
Oct-04
May-04
Dec-03
Jul-03
Feb-03
Sep-02
Apr-02
Nov-01
Jun-01
Jan-01
Aug-00
Mar-00
Median House Prices ($'000s) - Melbourne
900.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0
BRI Linear (BRI)
Feb-18
Sep-17
Apr-17
Nov-16
Jun-16
Jan-16
Aug-15
Mar-15
Oct-14
May-14
Dec-13
Jul-13
Feb-13
Sep-12
Apr-12
Nov-11
Jun-11
Jan-11
Aug-10
Mar-10
Oct-09
May-09
Dec-08
Jul-08
Feb-08
Sep-07
Apr-07
Nov-06
Jun-06
Jan-06
Aug-05
Mar-05
Oct-04
May-04
Dec-03
Jul-03
Feb-03
Sep-02
Apr-02
Nov-01
Jun-01
Jan-01
Aug-00
Mar-00
Median House Prices ($'000s) - Brisbane
600.0
500.0
400.0
300.0
200.0
100.0
0.0
Housing Affordability
Housing Affordability
Source: ABS
NSW VIC QLD SA WA TAS NT ACT
Source: ABS
Apr-2017
Jun-2016
Aug-2015
Oct-2014
Dec-2013
Feb-2013
Apr-2012
Jun-2011
Aug-2010
Oct-2009
Dec-2008
Feb-2008
Apr-2007
Jun-2006
Aug-2005
Oct-2004
Dec-2003
Feb-2003
Apr-2002
Jun-2001
Aug-2000
Oct-1999
Dec-1998
Feb-1998
Apr-1997
Jun-1996
Aug-1995
Oct-1994
Dec-1993
Feb-1993
Apr-1992
Jun-1991
Aug-1990
Oct-1989
Dec-1988
Feb-1988
Apr-1987
Jun-1986
Aug-1985
Oct-1984
Dec-1983
Feb-1983
Apr-1982
Jun-1981
Population Growth by State 9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
Population Projections by City 12,000,000
Population Projections
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin ACT
Source: ABS
Unemployment by State
Source: ABS
Questions?
Location: City / Suburb / Town
Location - City / Suburb / Town • • • •
Economic Outlook Population growth Levels of employment Proximity to closest major city, ocean, river and or town centre • Median house price of the suburb • Median house price of the neighbouring suburbs
Location: Activity / Handout
Location - City / Suburb / Town • Availability of lifestyle amenity (education, entertainment, retail and dining, fitness) • Availability of employment • Availability of public transport • Availability of road infrastructure • Demographics • https://www.realestate.com.au/invest • https://www.walkscore.com
Population Growth (med) by Increase
Source: Qld Gov Stat Office
Population Growth by Increase 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2011 (b) Gold Coast
2016 Brisbane
Ipswich
2021 Moreton Bay
Logan
2026 Sunshine Coast
2031 Townsville
Cairns
2036 Mackay
Toowoomba
Source: Qld Gov Stat Office
Population Growth by Increase %
Source: Qld Gov Stat Office
Housing Affordability â&#x20AC;&#x201C; Qld Regions
Source: CoreLogic
Suburb Performance by Proximity to the CBD
Source: Place Projects
Suburbs To Watch - House Suburb Prices
Source: Place Projects
Suburbs To Watch - House Suburb Prices
Source: Place Projects
Case Study 1 - Suburb performance Best performing Inner Brisbane suburbs for apartment resales over the last 5 years
Worst performing Inner Brisbane suburbs for apartment resales over the last 5 years
Source: Place Projects
Case Study 1 - Suburb performance Worst performing individual apartment resales over the last 5 years
Best performing individual apartment resales over the last 5 years
Source: Place Projects
Questions?
Step 3: Finding a Property
Property: Type / Characteristics
4. Property - Type & Characteristics • • • •
Price Type (house, townhouse, apartment , land) Age (new, existing, warranty?) Features (size, bedrooms, living spaces, bathrooms, car parking) • Ongoing land and/or building maintenance • Orientation (sun light)
4. Property - Type & Characteristics • • • •
Outlook (positive or negative) Tax benefits (building depreciation, fixtures depreciation) Scarcity of type (supply and demand) Potential to add value
Location: Property
Location – Property • Proximity to lifestyle amenity (transport, education, retail, hospitals, etc) – walkscore.com • Proximity to negative amenity (main roads, train lines and stations, industrial areas, etc) • School zone?
Location – Property • Streetscape (neighbouring houses, trees, road width, on street parking) • Council zoning • Negative Council overlays (flooding, waterways, transport corridors)
Location – Property • Realestate.com.au • Properties on market in vicinity
Location – Property • RP Data • • • • • • •
Property attributes Land size Last sale details Sales history On the market history – for sale On the market history – for rent Owner details
Location – Property • Brisbane City Council City Plan 2014 Interactive Mapping • • • •
Contours Aerial photo Zones & neighbouring zones Overlays - Bushland / Coastal Hazard / Flood / Transport Air Quality / Transport Noise Quality • LGIP - Roads
Location – Property • Physical drive by • Call agents
Questions?
Activity
Live research - 45 Deshon St, Woolloongabba • REA • Google Maps • RP Data • Sales Prices • Sales Campaigns
• CityPlan BCC Maps • • • •
Contours, Aerial Photo, Zoning, Overlays – Flood, Transport Air / Noise, LGIP – Roads
Live research - 388 Wynnum Rd, Norman Park • REA • Google Maps • RP Data • Sales Prices • Sales Campaigns
• CityPlan BCC Maps • • • •
Contours, Aerial Photo, Zoning, Overlays – Flood, Transport Air / Noise, LGIP – Roads
Questions?
Property: Aesthetic Appeal
5. Property - Aesthetic Appeal • • • •
Architecture Landscaping Colour palette Current presentation
Property: Design
6. Property - Design • Liveable floor plan (connected indoor / outdoor spaces, room sizes, etc) • Practical floor plan (storage, side by side garaging, etc) • Environmentally friendly (energy efficiency, water efficiency) Ex. natural light, cross ventilation • Occupant friendly (indoor air quality, Electromagnetic radiation (EMR), Radiofrequency (RF) • Technology
6. Property - Design • Storage • Room sizes • Living spaces connectivity
Property: Finishes & Inclusions
7. Property - Finishes & Inclusions • • • • • •
Colour Scheme Aesthetics Quality and warranty of fixtures Ceiling heights Heating / cooling type Occupant friendly (low VOC paints, toxin free building products, etc) • Environmentally friendly (LED lights, solar, water tanks, etc)
Property: Ownership Costs & Cash Flow
8. Property - Ownership Costs & Cash Flow • • • • • •
Can you afford to hold the property? Land tax Body corporate fees Body corporate sinking fund Property Management fees Building maintenance
8. Property - Ownership Costs & Cash Flow • • • •
Garden maintenance Interest costs Depreciation Rental return
Step 4: Purchase, Due Diligence & Settlement
Purchase - Offers • Written offers work best and should include: • • • • • •
purchasing entity details and address price holding deposit deposit remainder settlement date solicitor details
Purchase - Offers • Clauses (ensure your solicitor approves first): • • • •
finance building and Pest due diligence clause change to the standard REIQ contracts requiring the property remain at the seller’s risk • fire safety compliance prior to settlement • all rubbish to be removed otherwise amount to be retained from deposit at settlement
Purchase - Process • Contracts • • • •
REIQ – Houses and Residential Land (17 pg) REIQ – Residential Lots in a Community Title Scheme + Discl St (30 pg) Off the Plan – Community Title Scheme + Disclosure Statement (139 pg) Off the Plan - House and Land
• Other Documents • Form 8 – Agent Disclosure • Electronic Transmission Consent
Purchase - Process • Contracts • • • •
Offer formalised by purchaser signing contract and paying holding deposit Vendor accepts offer an signs contract Contracts exchanged and dated Due diligence / special condition time lines begin
Due Diligence • Carry out full investigations as discussed above • • • • •
Property Due Diligence Purchase costs Ongoing ownership costs Depreciation Cash flow
• Satisfaction of other clauses • Notify your solicitor, don’t assume
Purchase - Process • Contracts • • • • • •
Contract conditions satisfied – contract unconditional Pay remainder of deposit Perform pre settlement inspection Arrange insurance Settlement occurs on contract settlement date Pick up keys
Questions
Step 5: Property Management
Management: Property Management
Management - Property Management • Who is the property manager? • How many properties do they manage? • Do they have a good knowledge of the property (security, services, etc) • Do they know your warranty of building and fixtures? • Do they have relationships with the builder and/or trades who completed the work?
Management - Property Management • • • • • •
How do they achieve the best possible rent? How do they manage enquires? Where do they advertise? What is their current vacancy rate? Do they use professional photos? How do they report to you?
Questions
Management: Caretaking
Management - Caretaking • Ensure the external aesthetic remains superior for the long term (gardens, compliance, lights, etc) • Who is looking after the outside or common property? • Property Managers generally focus on the inside • The Body Corporate role is to administer the BC not manage the common property
• Is there a caretaker or gardener? • How are they reporting to the owners? • Does the Developer offer a caretaking service?
Questions
Step 6: Refinancing / Selling
Refinancing / Selling • Timing the Market • • • • •
Interest rates Vacancy rates Days on market Finance availability Supply / demand
• Maximising your sale price – staging, price research • Sale process – agents, marketing costs, sale types, etc. • Finance – equity, refinancing
Questions
Selling: Case Study #1
Selling: Case Study #1 Numbers: Current Value Carpet Blinds Handyman Clean Garden Display Furniture
$ 208,000 $ 1,590 $ 420 $ 3,657 $ 140 $ 420 $ 1,800 $ 216,027
Selling: Case Study #1 Numbers: Total Costs Sale Price Additional Profit
$ 216,057 $ 230,000 $ 13,943
Questions
Further Training
Live Property Training First Home Buyer Course Duration: 3hr
Property Investing Course Duration: Full day Property Renovation Course Duration: Two day Property Development Course Duration: Two day