You might already know a little something about the property market – you’ve read a few articles, talked to a few friends, or already own a home yourself. But until you’ve actually become an experienced investor, there are countless ways your first few property purchases could go wrong.

The wrong type of property, location, or just having poor timing can make all the difference.

In order to get on the fast track to success, any property investment expert will tell you it all starts with research and setting your own goals.

Flynn De Freitas, principal of boutique property research and investment firm, Omega Investments, says there are three golden rules to follow:

• Know your risk/reward profile
• Know your investment strategy
• Find the right property that suits your strategy

It’s the first rule, knowing your risk/reward profile, that is most important, he says.

“Everyone wants to double their money in three years, however investing in property needs to be made with informed and sensible decisions,” he says. “The saying, ‘A fool and his money are soon parted’ applies to all areas of investing, including property – not just higher risk assets like shares.”

Gambling on a speculative mining town promising huge returns, for example, can go terribly wrong if suddenly the demand changes. Sticking closer to capital cities, however, will almost certainly offer a more steady gain, albeit with a lesser chance for doubling your money in a few years.

“This said, everyone can invest with a good degree of safety in property when they first determine their risk reward profile,” says De Freitas.

When determining risk, investors also need to consider when they will retire. Most investors don’t consider the age they want to retire, but it should play a role no matter what their age is, De Freitas says

“This is really a function of where you are now and how long before you hit 65 years of age,” he says. “If you are under 40, then you might want to aim to retire young, perhaps by 50, given you have time to take a few more risks and still recover financially should anything go pear shaped.”

Those around the age of 55 or above should choose a more conservative strategy, he says.

Knowing where you want to be will make your property search all the more clear.

First steps

One of the first things to consider is to understand your own profile and experience level. Be honest with yourself and don’t overestimate your ability to comprehend the property market, as is common to do.

“Mostly likely, you will have a relatively low level of experience but hopefully a high level of enthusiasm,” says De Freitas. “That’s fine but just understand that the higher the profits from property investing, the greater the potential risk. The only way to reduce this risk is to have an equally high level of experience.”

Like in many things, a beginner in investing should start small with lower risk strategies, he says. Property investors don’t usually get rich overnight. They do it with patience and steady and careful growth to their portfolio.

Jo Chivers, director of Property Bloom, says investors should also start identifying a particular area they want to invest in early on.

“I think you’re better off focusing on just one area,” she says.

Once you’ve narrowed it down, it’s important to look at the data, such as how house prices have performed recently as well as what kind of rental yields can be expected and where vacancy rates are at.

“There’s so much data available these days, so there’s really no excuse for people not to do it,” says Chivers.

It might be an area the investor is already familiar with. If it is not, and perhaps in another state even, don’t hesitate to go and visit it before you truly go forward with any purchase, says Helen Collier Kogtevs, director of Real Wealth Australia.

Statistics can tell you a lot, but they need to be teamed with local knowledge, says Chivers. Investors should speak to the local council and residents.

“Speak to anyone you can find, really,” says Chivers. “Just find out what’s happening in the area. Historical data might not truly reflect all that is happening.”

Using either numbers or speaking to locals, you can determine what the type of market will be for renting your property. You want to be sure there are plenty of people in the price bracket that you will be renting for.

If you are just looking for capital growth, look for a property where you can sell quickly and at a fair price if necessary. Sticking near the median price range and with the right size in terms of number of bedrooms and bathrooms can keep demand for your property high.

Plotting your strategy

Aside from location, you need to strategise ahead for what type of property you will get, be it a unit or a house, and whether you’ll live in it, rent it out, and how long you’ll plan t keep it.

The current housing climate lends itself to renovations, says Chivers.

“I think it’s a really good time to add value,” she says. “I think we’re right in the early stages of recovery.”

Investors should be wary of overcapitalising their investment, however, by doing unnecessary renovations that don’t add value above the costs. Estimate the cost of your renovations and compare that with how much added value you expect it truly to make. It’s very possible to renovate and actually lose value if it limits the demand.

“There’s no point putting in premium fittings if you’re not going to get the return on it from the rental market,” Chivers says.

Investors should remember to keep renovations consistent with the local property market.

“Investors coming from capital cities tend to renovate from their standard rather than the market standard,” she says. “It’s important to remember that you’re not living in the house, though.”

While renovations can take time, you might also consider requesting access to an investment property to do the work before the move-in date, thus saving down time, says Chivers.

She says adding an extra bathroom or kitchen to an investment property right now could see a major increase in rent. Rental yields are already way up in many suburbs as vacancy rates are down near 2% or lower.

Another idea would be to purchase a large piece of land and subdivide it to create greater equity, says Chivers, noting it’s a popular strategy in the Hunter Valley north of Sydney.

If you’re developing land, find time before any purchase to speak to a surveyor and find if there’s easements on the property. Also speak to the local council and ask if its in a fire or flood zone, or if your plans would be considered suitable for the neighbourhood. Check the land as well and see if you’d be building on any kind of slant.

Base it on timing

Investment purchases should always be based on a strategy of timing the market. Chivers says buying off the plan is a good idea now.

“Right now, there’s very little development going on,” she says. “By the time that developer finishes the project, say 12 to 18 months later, we’ll probably be in a good upswing in the market.”

By doing so, there is an element of risk involves, she warns. But in general, those with the means to do it, now is a good time to make an investment purchase

“Interest rates are dropping and rents are rising – this is reward time for investors,” she says. “We’ve had some tough years with rates going up, but now is just a good time to relax and just enjoy your investment.”

A longer term strategy usually works best, rather than looking for prospective quick jumps in value, says Chivers.

“My strategy is just long term holds with good property that is well located,” she says. “In 10 years, if you’ve bought in a good place, the property will probably at least double in value.”

Knowing when to sell is also important. Now in particular is not such a good time, as prices have slumped across Australia. Unless you have to sell for financial reasons, its best to wait until the market recovers at a down time like this, says Chivers.

“Don’t sell now because we’re just about to start a new cycle,” she says.

Even renovations might not be necessary due to the extremely low vacancy rates in most cities.

“At the moment, you can increase rents with doing very little,” says Chivers. “If the property is in good condition, I would just leave it for now and just reap those rewards.”

www.realestate.com.au

“It’s an incredibly welcome move to assist more young Australians work towards a home ownership goal.

The accounts, which attract a government contribution equivalent of 17% on the first $5000 of individual contributions, are a move to encourage private savings, reduce inflation, and put downward pressure on interest rates. As the real estate market begins its upward climb after two consecutive rate cuts, the addition of the First Home Saver Accounts is likely to encourage even more buyers into the market.

Real estate agents nationally are optimistic. “These accounts will help one group of important buyers into the market, which is great for us to see. “Home affordability has declined in recent years, and fewer young people have been able to enter the market. This will make a big impact on first home buyers.”

“It’s part of the Australian dream. “Who doesn’t want to see their children or grandchildren achieve ownership of a home of their own?”

Offering a low tax rate of 15%, the First Home Saver Account also provides the equivalent taxation level of superannuation accounts to further help savings of people entering into the property market.

With major banks passing on partial savings to the Australian population, the monthly savings on mortgage repayments will bring welcome relief to many in the property market. “Those with mortgages will be looking forward to substantial savings and the rate cut also means renewed opportunities for first homebuyers, both of which will provide an added boost to real estate.

www.century21.com.au

According to David Imber, policy and liaison worker with the Tenants Union of Victoria, the shortage is a systemic crisis that has been getting worse over the past few years.

“There is a mismatch in stock, with not enough low-cost property, not helped by the Federal Government cutting funding on public housing by 30 percent over the last 10 years,” says Imber.

Chris Martin, policy officer with the Tenants Union of NSW, believes the shortage is a result of structural changes to super, which reduced investor interest in rental stock, and the end of the speculation boom in housing, combined with the multiple interest rate rises.

Whatever the reason, most of the crisis appears to be at the lower end of the market. “My sense is that the shortage is a particular problem for the inner city and low-cost rental market,” says Martin.

Given the crisis, which no doubt is exacerbated as tertiary students return to study, what tactics can you apply to be the winning tenant?

There are more harmless ways of scoring a property than the so-called silent auctions, which have potential renters offering more than the going rate or up to a year’s rent in advance.

While this practice appears to be on the rise, Imber says it doesn’t help anybody. “You might as well be bidding against yourself — it’s not helping you nor is it helping anybody else. It just adds to increasing median rents. And it is often in breach of fair trading.”

Graham Joyce, president of the Real Estate Institute of Australia, says his association does not encourage such a practice. “It is not our practice for agents to seek higher rents than those advertised. Rents are not everything. You are better off having a quality tenant who doesn’t cause damage to your property than an extra $15 a week. Quality (of tenant) is paramount; the rental amount is secondary.”

BIS Shrapnel estimates that rents will rise more than 40 percent over the next five years. The NSW Tenants Union claims that about one quarter of low-income households pay more than 30 percent of their income on rent. “These households simply cannot afford to pay more rent,” says Martin.

If you are a group of friends hoping to rent together, will putting just one name down as a tenant help you to secure the property?

The answer is probably no, according to Imber. “If you have more than one name on the lease, this gives the landlord greater security as it reduces the risk should one of you lose your job.”

Another issue for would-be tenants is patience with the process. Joyce says that if there are a dozen applications for one property, it takes time to process these.

Clearly there is a shortage of rental property and while that exists it inevitably puts pressure on rents.

Perhaps with the steadying of interest rates and property prices falling in some states, more people will be able to look at buying and thus curb rental demand.

Checklist

1.       Be organised

2.       Arrive early to open house inspections

3.       Dress appropriately — thongs and shorts will not win over agents

4.       Write a letter expressing your interest to accompany your application.

5.       Attach references from previous landlords and/or managing agents.

6.       Provide proof of income

7.       Lodge an application with all agents in your preferred area and ask to be advised of properties.

Sydney auction clearance rates are off to a slower start this year as buyers are clearly spooked by the prospect of rising interest rates, the credit crunch and a slowing economy.

Last weekend, the auction clearance rate was 49.9 compared with 60.4 per cent for the same time last year. These figures include properties that have been withdrawn from sale, says Michael McNamara, general manager of Australian Property Monitors.

“This really tells you that buyer confidence has been bashed around,” he says. “It wouldn’t surprise me if we saw softer conditions persisting throughout the year, which means, for those in a position to buy, it may be a good time to take stock and start looking for those bargains that are no doubt out there.”

Along with the need to factor in more rate rises, buyers need to consider carefully whether or not the house is right for them. Here are some tips to get you started.

CLOSE INSPECTION

A building and pest inspection may cost about $550 for a four-bedroom home but could save you thousands. This type of inspection is a visual assessment of the condition of the property, says David Kessler, managing director of the Building Centre.

Stephen Ransley, general manager of Tyrrells Property Inspections, says about one in three properties has a pest problem. A building inspection can highlight illegal or dodgy renovations, leaking bathrooms, rising damp and problems concealed by paint or render.

Kessler says termite damage and structural problems are not covered by insurance and are expensive to repair, something worth considering if you are wavering on the inspection cost.

Also, when the market is running strongly and you’re missing out on properties, the cost of several building inspections may seem excessive.

However, Rod Cornish, head of real estate research for Macquarie Group, says it is always worth it when buying a home. Along with the building and pest inspection, don’t forget to organise a solicitor or conveyancer to inspect the contract and carry out the necessary checks.

GOOD VIBRATIONS

Some people like their home to have the right feng shui for health, wealth and sound personal relationships. The Building Centre can organise this type of assessment for about $385. If you’re not a feng shui fan, check the property is not overlooked and there are no privacy issues.

GREEN POWER

More buyers want a sustainability assessment, given the price of power, Ransley says. “In Canberra, it is compulsory before selling a house to have a sustainability analysis, which looks at the house’s thermal capacity, glass area, insulation, orientation and rainwater tanks and solar hot-water capacity,” he says.

A lot of buyers are still uncertain of the value of the area where they are house hunting, says Michael Harris, of Raine & Horne Newtown. He recommends approaching agents for a comparative market analysis that lists sales in the area with a photo and description of the property plus information about days on the market.

Cornish advises buyers to look at price movements over a year to see if they are accelerating or slowing.

Buyers can also visit websites such as www.homepriceguide.com.au (produced by Fairfax, publishers of Domain.com.au) for a property report  which gives a current price estimate, a forecasted price estimate (to help you work out whether to buy now or later), sales history, median price trends and comparable sales, but please remember these will never be accurate,

RIGHT ASPECT

The right aspect can enhance your enjoyment of your property: it can be warmer in winter, cooler in summer and the garden, deck or courtyard may be a place to retreat to rather than withdraw from, says Donna Hartley, of property managers Quinn Harrington. Plants will thrive in the right aspect.

DUE DILIGENCE

You may be tired of pounding pavements every weekend but don’t let that fatigue affect your due diligence. Annabelle James, director of buyer agency Buying Sydney, says you must be sure you buy what you think you are buying. “We found what appeared to be a perfect property for one of our clients last year: a solid Californian bungalow on huge block of land, ripe for makeover and in a quiet street.

After a check on the ownership of surrounding properties, we discovered that the vacant block opposite was owned by the electricity board and was shortly to become the area’s newest electricity substation. It definitely pays to do your homework. It helps you to make an informed decision and puts you in a stronger bargaining position when it comes time to negotiate.”

SOUND CHECK

Cornish recommends visiting the local council to check whether there are plans to widen roads, redirect traffic or build large developments that may create more sound. Also, visit the property at different times and talk to neighbours about noise issues. Find out if there are rowdy parties at nearby apartment blocks or if there are drag races on Friday nights.

CIRCLE THE PROPERTY

Start with a broader area then tighten the search circle, says KPMG demographer Bernard Salt. Look at transport options and community infrastructure such as medical facilities and access to schools then turn your attention to green spaces within a convenient walking distance where people can cycle or throw a Frisbee, then seek galleries and libraries that add to the cultural capital of the area. As you close in on your search, check the streetscape: are houses set back at odd levels giving “a jagged-tooth effect” or are all the properties stepped back into a pleasing common line? “At any point where the property doesn’t measure up, you move on,” he says. “If you do it the other way around and fall in love with the house first, you may only make the occasional foray outward to look at things.”

Housing Industry Association data reveal households are spending more on renovations: it cost an average of $1769 a square metre last year on a ground-floor extension compared with $1250 in 2002.

Cornish says if you’re planning to renovate, obtain quotes from tradesmen before you buy. The Building Centre can also organise an inspection with an architect to assess and discuss the potential of the home and site for $495. “A recent customer had three design possibility inspections carried out by three different architects to give him the best choice of ideas and creative possibilities,” Kessler says.

FEAR NOT

Many people prefer to buy property through a private treaty to avoid the stress of auctions, says Patrick Bright, director of EPS Property Search. But they are significantly reducing their property selection pool and may miss out on good buys.

“Instead of being scared of auctions, you need to get educated. Go to a number of auctions and see how they work. Do your research so that you know the value of the property. Set yourself an auction plan including a maximum bid price and stick to it,” he says

Practical Tips
When you are saving remember that every little bit counts. A good saving strategy is like a marathon, it doesn’t matter what you do in the short term as long as you finish the race – save sufficient deposit to buy your own home. Here are some trips to help you save more effectively:

• Develop a budget and savings strategy
• Start as early as you can. The sooner you start, the more time compound interest will have to kick in and help build up your savings
• Every little bit counts so make sure you maximize your opportunities to save
• If you are renting, try to get out of rented premises as soon as you can. Rent is wasted money
• Try and save at least 20 per cent of the purchase price so you can avoid paying lender’s mortgage insurance
• Make sure you have a demonstrated savings history – lenders will not lend you money if they don’t know you are responsible when it comes to finances
• Pay off your debts. Yu can’t save if you are paying of other loans
• Give something up that you don’t really need. Work out ways to save small sums of money regularly and add them to your savings. If will help establish a savings history and boost your savings
• Find the right account. Remember you can get better returns over a mid-long term period of time with non-banking financial institutions but must balance risk against return – and you may not get a positive return.
• Share returns historically outperform other investment types over time but are volatile and may have large establishment fees. If you have time before you buy, it’s an option worth considering.

I hope these simple tips help you become one step close to a new home.

www.century21.com.au

www.yourmortgage.com.au

www.thefinancialblogger.com

THE Reserve Bank has handed you a huge opportunity. And I mean – at a conservative estimate – tens of thousands of dollars huge…

There were months of media speculation about whether the commercial banks would pass on a Reserve Bank rate cut. When it came, they virtually fell over themselves to do so.

Assuming yours delivered the full 25 basis points, your required repayments will soon drop by about $17 a month for each $100,000 you have borrowed, or

$43 for each $250,000.

With cost pressures seeming to grow by the day, that’s welcome news. It gets better, though.

The cut takes the Infochoice benchmark variable rate (IBVR) – a weighted average rate that reflects the discounts people commonly receive on the quoted standard variable rate – from 9.3 per cent to 9.05 per cent.

That means you will now pay almost $13,000 less in loan interest over the life of a $250,000 home loan, $25,818 less on a $500,000 loan and $38,726 less on a $750,000 one (25-year term).

But here’s where the enormous opportunity lies: if you can manage to leave your repayments at their current level, you will keep from the bank – and for yourself – far more. For example:

* What is now a $43 overpayment on a $250,000 mortgage will save you $17,000 in loan interest.

* What is now an $86 overpayment on a $500,000 mortgage will save you nearly $35,000.

* And what is now a $129 overpayment on a $750,000 mortgage will save you just under $52,000.

In all three cases you will also repay your loan a whole year early.

Bear in mind, too, that this is the effect of maintaining your repayments when there has been just one rate cut. Some economists are predicting more like four in the next year in a bid to stimulate economic growth and buffer Australia from the global credit crisis.

How would a full 1 per cent fall change the figures? If the IBVR moved from

9.3 to 8.3 but you held your repayments steady, you would save $49,408 in interest on a $250,000 loan, $98,305 on a $500,000 loan and $147,773 on a $750,000 loan.

Yes, that much. And remember, it’s not cost you one cent beyond what you are used to paying. In all instances you would also be debt-free 31/2 years sooner.

The reason keeping your repayments at the same level when rates fall is so powerful is that, immediately, less goes towards interest and therefore more to paying down your principal. The lower the rate drops, the more dramatic the effect.

So maintaining repayments come what may is one of the smartest ways to beat debt. With your mortgage outlay, if at all possible, the only way should be up.

What do you do to make sure you get the savings on offer? Nothing. Unless you say otherwise, your bank is unlikely to reduce the amount it debits for your monthly repayments. They are typically much quicker to adjust direct debits for rate rises because they are out of pocket if they don’t.

Of course, for you to get the full benefit of what will now be extra repayments, your bank will need in future to cut its interest rates at pace with the RBA. And with profits squeezed courtesy of the credit crunch, none will commit to that.

Still, every little bit helps.

Have a fantastic week and please don’t hesitate to contact us, we are here to help.

 This is brought to you via a good friend of mine Michael Link  – michael@loansleaseslifestyle.com.au

I have noticed may owners cleaning the Moss, Mildew and Algae from their front fences, driveways, paths and roofs before placing their home on the market for sale.

A product that I have personally used and recommend is called ’30 Seconds’. This product simply needs to be diluted with 15 Litres of water then sprayed on the effected surface. It will eat at the moss/mildew/algae, after a few days you can simply wash it off.

To view this product go to:

http://www.30seconds.com.au/product_roof.html

In this tougher selling market, the task of easing vendors into the new reality that their property is not worth what it so recently might have been, is not being helped by intensified competition between agencies touting for business.

Selling in a buyer’s market

- Be realistic about price. The spring property market of 2008 is down on last year’s.

- Research the local market. Go to auctions and see which properties are selling.

- Take advice from your agent, especially that on what is a “good offer” for your home. If you get two similar offers – that’s where the price is at.

- Beware of over-optimistic valuations. They might cost you money and time as ultimately it is the market that sets the price.

- Do not buy before selling your own house.

Although 60% of properties are selling at auction, others take longer to sell.

- Follow the golden rules about presenting your property well.

- You will probably be buying on the same buyer’s market. So any vendor price disadvantage is ironed out when you buy.

Always remember if your selling and buying in a bad market the loses and savings will balance each other out.

http://www.domain.com.au/Public/Article.aspx?id=1220121519440&index=NationalIndex&headline=Vendors%20must%20meet%20the%20market

Many of us only use the internet for house hunting and finding an agent and this is taking over the traditional methods of walking into an agents office and dealing face to face.

Mike Andrews has some facinating information that i would like to share with you:

1. Home buyers and sellers consider approximately two agents on average before making a final decision.