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Figure 1 Is it a good idea to invest in rental real estate? Alt. Building.
Investing in real estate consists of buying, owning, managing, renting or selling properties for profit. Real estate industry has grown drastically over the years, and so have the challenges. With so many options at hand, we must ask ourselves – is it a smart move to invest in rental real estate at this moment? There are many things that need to be taken into a consideration before making your first move, but we will try to help you create an opinion and make your first decision.
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Real estate investments in 2018 look promising
If you want to start investing, but you are not sure if you should pick stock or real estate as your new investment – we suggest you reconsider investing into a real estate market once again. Owning a property is almost always a safe investment. When you buy an apartment, house or any other kind of a property it is very unlikely that you will experience a major or total loss. Why is that? Well, this type of investment is secured by a physical asset. Also, people will always need a place to live, and it is not a surprise that many investors put their money on something that is always in a demand. Real estate is a long-term hold, and you won’t depend on market after making your first move. In the vast majority of cases, it is stable and it will retain its value over the period of time. But, let’s see why you should invest in rental real estate:
- Your tenants will pay for your investment.
- The value of your property will only increase over the years.
- If you invest in rental real estate, there is almost no space for failure with so many options and opportunities.
Let your tenant pay for your investment
If you are interested in long-term real estate investments, you should be aware of some positive facts first. The number one reason to get in this business is to generate a passive income. This type of investment will not only build equity, but it will also produce positive cash flow. With every mortgage payment that comes from your tenant’s rent you will be paying for your investment with someone else’s money. So – why not? This is a win-win situation, and you should use it at your advantage. Also, if you are not a professional real estate investor, renting your property is the safest way to get your money back, even if you haven’t used a loan as a payment method.
Figure 2 Soon after you invest in rental real estate you will realize more than one way to get your investment money back. Alt. Laptop, notebooks, cactus, coffee, glasses and phone. the value of your property can only grow
We know that getting started in a new field is never easy, but believe us – becoming a real estate investor is simple and safe. There are so many financing options that you should explore and use as an advantage. Make a strategy, and be patient. Invest some money, and wait. It will pay off in the long run. Or, if we look at the past few years – not so long run.
We all know that investing in this market requires a lot of money, but the situation here is much different then with the stock market. You don’t have to be a professional broker. Also, you won’t need all that luck. The only thing you should do is to try to make the smartest possible move, and hope for the best. But, either way rest assured – the value of your rental property will only grow.
Leverage your capital
Just like we have said previously, you should use many different financing options as a leverage. Unlike with other markets, when you invest in rental real estate you can buy a property with cash combined with a loan. This is an aspect used by many investors who secure many mortgages and grow their business with only 20% down payments. This is a great option if you want to use conventional financing as an advantage – use your cash to purchase more properties and maximize your investing opportunities.
Figure 3 Do your research before you make any moves. Alt. Image of a building.
As the time passes, more and more people are starting to invest in rental real estate market. It is a lower risk and it offers a much better returns rate. It is a common situation that an individual wants to invest in rental real estate, but doesn’t know where and how. That is the main reason why you should do your research, make a plan and think about it once more. You will need to figure out a way to get the best results. Or, you can even get some help with deciding from professional advisors. It is really your choice.
What are the next steps after you invest in rental real estate?
It might be a good idea to invest some more after just obtaining a property. This can be a huge factor when you start renting it. You don’t need to spend all of your money, but making small changes here and there can create a much better picture of the property itself. Also, its value can increase more than you think. And that is the main goal! It will assure better return rate and increase your income.
Figure 4 Making small changes can increase the value of your property. Alt. Image of a kitchen.
Pay attention to the details
Small details can make a huge difference. Changing the layout of let’s say one whole kitchen can cost you a lot of money, but there are a few decorating tricks that you should use. Repainting the walls and installing a new air-conditioning system can make your property much better looking. Add some new furniture. Do your research, and try to find the best match. Make sure you don’t overstep your budget. Stay focused, and remember that the main goal after you invest in rental real estate is to earn as much money as possible – not to spend it all.
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The housing market in Australia is tough to break into and renting can provide an affordable solution. Finding a rental property or renting out your own investment will take time if you want to do it properly. Before you jump in with the first opportunity that seems right we asked the experts what to look out for when renting.
FOR THE RENTERS
A lot of issues that come up weeks or months into your lease could have been solved at the initial meeting if you knew the warning signs. Real estate agent and founder of Vogue Real Estate, Nicole Ciantar, has these tips for future renters:
“It can be very stressful living in a rental property. There are lots of things to consider, for example; how long would I be able to live in this property? Will they increase the rent? Can I have a pet? And that is just to name a few!
If you’re unsure of what you’re about to get yourself into consider these tips:
– Do you have a rapport with the agent/landlord
– Ask questions like “does the owner do repairs promptly?”
– Do a thorough check of all appliances to ensure they are working
– If the agent/landlord says they will be doing works at the property ensure it’s written into the lease
– Ask “why did the last tenants move out? This is an indication of what you’re about to receive (if they tell the truth)
Some general warning signs:
– Is the property in a poor state of presentation
– High tenant turnover; you should be able to find this out via google
– If the agent/landlord isn’t engaged with your conversation then they don’t care which in turns means lack of communication and knowledge so your rental experience is going to be poor”
Find out more on Facebook or get in touch on firstname.lastname@example.org.
HOW TO MAKE YOUR RENTAL COMFORTABLE
Renting a property is not typically a long-term plan. You’re thinking year by year, or even month by month. You’re also prepared to change your living conditions quickly. With this in mind you don’t want to set up an overly permanent home. But you also want it to feel like home while you’re living there. Here’s our advice for comfortable renting:
Keep it to the bare necessities. Everything you own should be able to be packed up for storage or sold in the case that you or your landlord decide to change your living arrangements. To save money and time look for attractive furniture online. It’ll be delivered straight to your door which eliminates the need for trips to the furniture store or lugging it up the stairs by yourself.
On that note, a bed base and headboard is going to be the best option for storage and comfort. Many people think they can get by without a sturdy headboard but this is not recommended. Leaning against your headboard in bed will be much more comfortable and prevent smudges, marks or sweat transferring to the walls. It can also add a layer of insulation for thin walls which may be a feature of newly built or renovated properties.
You may have found a furnished rental which came with the mattress, bed and other necessities. This is great because it saves you the effort of buying expensive furnishings but the downside is you haven’t hand-selected your furniture. For example, the mattress may be too firm for your liking. You could always buy a new mattress that suits your needs. Another option is a soft mattress topper which will customise the fit and feel of your bed without requiring storage space for when you’re on the move.
FOR THE OWNERS
It’s not just the tenants who should be discerning when entering the rental market. Sydney Buyers Agent Dean Berman helps many Australians find investment properties which many decide to rent. Here’s his advice when choosing tenants:
“Key points to look out for when renting property:
– Do your best to ensure your tenants will treat the property with respect and will be able to pay the rent on time by screening them on areas such as job references and rental databases
– Make sure you feel comfortable with the tenants during the inspection
– Understand how many people will be living in the property
– Ensure you make the ground rules clear such as no sublets if you don’t want an AirBnB situation occurring
– Try to understand the tenants previous rental history
– Take photos of the property before renting it out, so you can see what it looked like in its original condition
The main warning signs:
– If the tenants don’t have secure employment, then there could be potential issues, make sure you can see proof of funds or potentially organise for the rent to be paid in advance to reduce risk
– A poor rental history or constant moving”
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Don’t get caught out by a lack of knowledge. Whether you’re looking to rent or looking for tenants in your investment these are the warning signs and general tips to keep in mind.
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Tax return season. Sure, it might be a little annoying to fill out all the paperwork, but once you see that money come right back into your account as a result it’s always worth it.
Many people receive fairly sizeable returns, and when that’s the case, it’s hard not to want to go out and spend it on something luxurious. However, that’s probably not the best way to handle your money. Most financial planning advice encourages tax return recipients to save, save, save.
While putting that money right into your savings account does seem like the most reasonable course of action, it’s understandable that it can be challening and boring, even. So here are some ideas for smart, regret-proof ways to spend your tax return.
Pay off old debts
You might think that buying that new flat screen television is going to feel more satisfying, but at the end of the day, having your debts paid off is going to feel much better. Pay off as much as you can, starting with the highest interest debts, as these are only going to cost more in the long run.
Additionally, you should use this as an opportunity to reset your financial goals and ensure you stay on top of your debts moving forward. Ensure you’re making regular payments so you have a good credit report.
The best way to improve the value of your money is to invest it. Do your research before you put your money into anything or see a financial planner.
You can also invest in things like your home. Consider doing some home improvement projects or renovations that will increase the value of your home. Whether that be replacing old appliances with new, energy efficient ones, or redoing the bathroom.
You want to be sure whatever project you’re doing increases the value of your home. For example, removing storage space to make a bigger room without replacing the storage can actually decrease the value as people are easily turned off from a home that doesn’t have a place to keep their possessions.
Put it in an interest earning account
While depositing money into a transactional savings account feels responsible (and not to say that it isn’t), it is better if that money is working for you. Instead put the money into an interest earning account.
Of course, you can create your own savings account for whatever you want! Perhaps you want the money to go to a big trip or a new house or an emergency fund – whatever it is, give the account a special purpose and you’ll likely feel more accomplished as you put money in.
Spend it on something you need
First we should define the difference between ‘want’ and ‘need’. A want is something you desire, but can live without, like a new bag. A need, however, is something you can’t function without like a car repair or that dentist appointment you keep putting off. Investing your money into yourself is going to be one of the best things you can do with your money.
Here are six basic principles that anyone can apply to achieve great results, even if you are starting with limited resources. Remember, without a property financial plan your good intentions may not amount to much.
- Put money towards your savings first
Make sure that you regularly set aside some of your income before you’re tempted to spend it. Before long you’ll have enough to consider a range of investment options.
- Invest for growth
Over the longer term, growth investments such as shares should give you a better overall return than cash-type investments, but are likely to be more volatile. Everyone’s attitude to risk is different so you need to choose investments that are suitable for you.
- Too good to be true
Steer clear of investments with unrealistically high returns as most of the highly tax-driven investments that you may read about are often riskier than they appear.
- Invest tax effectively
Remember that money invested in Australian shares or managed share funds can earn you imputation or franking credits. These reduce your income tax paid on any dividends or can potentially be received as a tax refund.
- Make the most of super
Super is still the most tax-effective form of retirement saving for most people. If your employer allows it, you can implement a salary sacrifice strategy to make additional super contributions directly from your pre-tax salary. This means your super will be increased and, because of the concessional rate of tax that applies to super, you will pay less in tax.
- Spread your risk
Don’t put all your eggs in one basket – maintain a balanced approach to investment. It is generally a good idea to spread your investments across a number of different asset classes such as shares and property, fixed interest and cash. Often if one asset class performs poorly, another may perform strongly. A diversified approach can keep your investments growing steadily.
Financial advice makes a difference!
Bridges Financial Pty Ltd
In response to our landlords recent requests we would like to suggest that all tenants who have gardens, lawns and plants to water them this season.
We have spoken with fair trading on your behalf about watering gardens , lawns and plants and their response was to quote the Tenancy Areement section 16.
16.1 The tenant agrees: to keep the residential premises reasonably clean,
And gave this example:
When a tenant moves into a property and the grass is green and the roses are red, when the tenant vacates the property and the grass and roses are dead the tenant could be liable which could incur lost of bond or paying for landscaping.
Therefore we would like to encourage all our tenants to care for the garden, lawns and plants this summer
Vogue Real Estate
Consumers of services beware! Everyday all types of businesses are giving sales pitches to try and get your business. Sometimes the sales pitches are genuine and sometimes you know they are so way out but they can be good entertainment value. The problem is when a sales pitch seems so genuine and you accept it in good faith and you don’t find out it’s a lie until you’ve paid the $ and not got what you were promised.
A client mentioned to me recently that they had been in a situation where they needed to make a decision about a service offering between two service providers; one was an independent company and the other was a single franchise of a national company. Despite preferring the professionalism of the independent service provider the customer decided to choose the franchise after being told by them that they could expect an immediate sale as the franchise would have a national network and bigger reach due to being a chain.
Realistically, it is likely this would only be the case if that franchise owner is the owner of all franchises in the company, as franchises tend to operate independently. As a result, their single franchise reach is no different to the independent company. As a consequence a statement like this from the franchise is treading on dangerous ground in regards to Section 18 of Australian Consumer Law. Section 18 of Australian Consumer Law is all about Misleading and Deceptive Conduct.
If the rest of the franchises do not participate in helping increase the reach of the customer’s product and the customer has made their decision to engage the franchise over the independent based on the information and sales pitch that they do, this is then potentially a breach of Australian Consumer Law (ACL).
So if you are promised the world by a service provider make sure you understand what they are promising. Ask questions as to how they will deliver and make them accountable on their promises. This will go a long way to ensure you are not just delivered a sales pitch and that the company knows you make them responsible for their promises. Ultimately you deserve to get what you are paying for. It definitely pays to know your rights as an Australian Consumer!
As a tenant or landlord, you should be familiar with the rules about who bears the responsibility for maintenance and repairs of your rental property. These rules can seem quite complicated as the responsibility changes hands depending on the type of damage. The general rules are contained within the Residential Tenancy Agreement, which distinguishes between three main types of damage: maintenance, urgent repairs, and non-urgent repairs. Also, as a landlord, you may be wondering what responsibilities belong to you versus your property manager. This article will give you a quick and thorough summary of the rules so you have a good understanding of your rights and responsibilities.
According to the Residential Tenancy Agreement (RTA), tenants have several responsibilities with respect to their rental property. These include:
- Keeping the premises ‘reasonably’ clean.
- Telling the landlord about any damage or disrepair ASAP.
- Leaving the premises as close as possible to the condition they were in before the tenancy began – except for ‘fair wear and tear’.
- Not damaging or permitting damage to the property either purposely or negligently.
- Not adding or removing fixtures from the premises.
- Not doing any renovations or alterations to the premises without written consent from the landlord, unless permitted under the RTA.
If a tenant fails to comply with these obligations, the landlord may apply to the NSW and Administrative Tribunal (NCAT) for any of the following orders:
- the tenant complies with the tenancy agreement; and/or
- to end the tenancy; and/or
- for compensation.
Landlord and/or Property Manager Obligations
Landlords also face a number of obligations with respect to the maintenance and repair of their rental properties. The actual extent of their active duties will depend upon whether they are self-managing landlords or if they have a property manager looking after their property.
Generally, the landlord of a rental property has an obligation to:
- Provide the premises to the tenant in a ‘reasonably’ clean state which is fit to live in.
- Provide and maintain the premises in ‘reasonable’ repair (even if the tenant was informed of any disrepair before moving in) à ‘reasonable’ repair depends on the age of the premises, the cost of rent and the potential life of the premises.
- Make any repairs mentioned in the original condition report.
The landlord is not responsible for any damage caused by the tenant. If they wish to claim compensation from the tenant for such damage, they must make reasonable effort to minimise the cost of any repair or replacement.
I have a Property Manager – What are their responsibilities? Am I still responsible?
As a landlord, having a Property Manager is an excellent option if you want to assign your ongoing, routine duties to somebody else who is much more experienced. Property managers will typically take care of the physical management of the property, including regular maintenance and repairs. The many duties of Property Managers include:
- Preventative maintenance à This is aimed at keeping the property functioning in top condition, thereby keeping current tenants happy and attracting new tenants. For example, Property Managers are personally in charge of, or must hire someone to:
- check for leaks,
- shovel snow, and
- remove trash.
- Repairs à Where there is an issue, the Property Manager must attend to it themselves or hire someone else to attend to it. Property Managers often have a large network of reliable plumbers, electricians, carpenters and other contractors who can get the job done quickly and to a high standard.
Self-managing landlords are significantly more exposed to risk of liability from maintenance or repair issues. History shows that unless landlords have specific experience in inspecting properties for safety issues, they are much more likely to be included in a claim. Even if you do have a Property Manager though, it is important to remember that the argument of “I was paying a Property Manager to look after my property, so it’s not my responsibility – it’s theirs!”, has proven not to fly well with the courts. Therefore, as a landlord you need to remain proactive in ensuring your property is kept in the appropriate condition required by law. This could involve keeping in regular contact with your Property Manager and asking for updates and/or photographs of your property to ensure it is up to standard.
Urgent repairs are defined by the RTA as including any work needed to repair any of the following:
- A failure of the gas, electricity or water supply.
- A failure or breakdown of any essential service for cooking, heating, hot water, laundering or cooling.
- Any fault or damage that makes the premises unsafe or insecure.
- Serious damage caused by a natural disaster.
Examples of urgent repairs include:
- A burst water pipe
- A blocked or broken toilet
- A gas leak
- Serious fire or storm damage
- A serious roof leak
- An appliance or fixture, such as a tap, that is broken and causing a substantial loss of water.
The usual protocol for an urgent repair is for the tenant to immediately notify the landlord or Property Manager about the damage – in writing if possible. If the landlord cannot be contacted or is unwilling to do the urgent repairs, the Property Manager and/or the tenant has the right to arrange for the repairs to be done. It is strongly advised that no more than $1,000 is spent on the repairs, as the landlord is only required to pay reasonable costs up to a maximum of $1,000.
The landlord will be obliged to pay within 14 days of the tenant and/or Property Manager’s notice, so long as the tenant is able to show that:
- He/she was not at fault for the damage;
- ‘Reasonable’ attempts were made to contact the landlord and/or Property Manager;
- The Landlord and/or Property Manager were given a ‘reasonable’ chance to do the repairs; and
- The repairs were carried out by a repair person named in the tenancy agreement (if possible) or by a licensed or qualified tradesperson.
Further, the tenant must provide written notice of the repairs, costs and copies of receipts. If the landlord refuses to pay, the tenant can apply to NCAT for an order that they do so.
Need help with your Rental Property?
If you are looking for an experienced Property Manager for your investment property or would like any further information about your rental, please don’t hesitate to contact me.
Vogue Real Estate