Category Archives: Buy and Hold

Stop! Don’t Go Changing Jobs Right Now…

Stop! Don't Go Changing Jobs Right Now.... Getting approved for finance is tough enough without putting major hurdles in front of your application unnecessarily by changing jobs.

If any circumstances change between the date you first submit your finance application and the date of settlement of your loan, then the bank may not look kindly on your application, and in fact in most instances, will decline your application completely.

Trouble is – most people are not aware of this!

CASE STUDY:  CHANGING JOBS AT THE WRONG TIME

Recently I saw a familiar case where an investor had selected a great little investment property and placed his application for the loan. Being disgruntled with his job he decided to quit and take a holiday. He planned to get a new job when he got back home, which he did. When he returned home his loan application process continued and he had to provide documents to the bank to support his income. The bank saw that he had a change in job and promptly declined his application!

If he had only just stayed in his job for a few more weeks until the loan application was finalised, he would now be the sitting happily on his first investment property.

I see this same scenario happen over and over and I want you to avoid the same thing happening to you!

(Even real estate agents will tell you not to change jobs when you are in the process of buying property.)

TIMES HAVE CHANGED

In days gone by, investors didn’t have to think about this so much because it was common that the career you went into as a 16 year old was the same career you had when you were making all of your loan applications as an adult.

Today the world is a different place. People are less likely to remain in situations that make them unhappy, especially jobs. Many employers demand more of employees, longer working hours and less gratitude for work done. It’s not uncommon for employees to change jobs multiple times in their working career.

Of course, the long term purpose of helping you to build wealth through property is to no longer have to rely on an employee status for income. But, in the meantime, initially you need your job to support the serviceability of your loans.

ARE YOU A RISK TO THE LENDERS?

Lenders look more favourably on borrowers who have a reasonably stable recent employment record. They prefer you to have had at least six to twelve months or more in your job, receiving regular income.

Lenders like to be reasonably sure the borrower has a reliable future income based on their current income. If they see a borrower has been changing jobs over a short period of time, there is just not sufficient evidence to back up their financial stability.

Equally high risks to lenders are borrowers who have gaps or breaks in their work history or have had a change in pay structure. For example, if you move from a salary to a position that is commission based, you will be tagged as a higher risk. This will occur even if your new employment conditions provide you with a higher income.

Moving to a commission based employment arrangement will be considered along the same lines as someone who is self employed. That means, you would have to prove a two year history of your new income levels before that additional income can be included in a loan application at all.

WHAT TO DO IF YOU HAVE CHANGED JOBS

If you have had a job change, no matter what, a lender is going to need the following things from you — and your employer — in order to approve a loan application: an offer letter for the property purchase, a role change letter if you have a title change and commensurate compensation package change, and the most recent pay stub and verification of employment.

It’s not all doom and gloom…..

If you have just changed jobs – don’t be tempted to do nothing expecting that you’ll have to wait for time to pass. Every lender views all circumstances differently. A good broker will be able to match you up with a bank that will look most favourably on your conditions.

Other circumstances that can also affect the loan approval process for you are:

  1. Not being honest about your financial position
  2. Not including all your expenses
  3. Get the paperwork details right first time
  4. Understanding your borrowing capacity before you place a formal approval
  5. Shop around to get matched with the best lender for your circumstances
  6. Be prepared for additional loan costs

A FINAL ROUNDUP

If you are looking to be changing jobs around the same time you are looking to buy a property, seriously consider doing just one or the other. Stay in the same employment at least until you have the mortgage.

If you already have a mortgage commitment and are determined you’ll be changing jobs, ensure you have enough money saved to cover mortgage repayments and lifestyle costs for a few months or even more, in case things don’t work out.

I hope these tips help you be more prepared when you are ready to apply for mortgage funds.

Thoughts, questions? Leave a comment & let’s talk…

Here’s to your success!

Fay McLean Property Investing Support

 

p.s. At the very least, consider getting yourself a complimentary Financial Health Check just by contacting me here. It’s a great way to see how much you can borrow in your current circumstances.

11 Tips For New Investors Nervous About Buying A Rental House

nervous buying rental propertyAs a new property investor, these are some of the ideas that have helped me and others get going when we have been nervous about buying a rental house.

1. Turn your analysis paralysis into a need-to-do list.

Breaking the whole investing process down in steps or a timeline will make it easier for you to take the emotion out of the process and just focus on what you need to do next to reach the goal you desire. It adds to confusion and nervousness if you try to remember everything in your head. Get it out on paper and worth through what needs to be done systematically.

2. Don’t get bogged down in media headlines.

The only way news channels and newspapers keep themselves in business is by selling. The bad stories make a great headline. That is why you see and hear so many. These horror stories and stories about the market dropping out of property is what feed the newsroom.

3. You are buying a rental property not a home to live in.

The property you buy will be a home to someone else, but it will not be your home.  Make your decisions from the point of a landlord and not a home owner. Many tenants will not have the luxury of being picky about things such as whether or not the bathroom is at the beginning or end of the corridor. Buy a property in a good location at a good price that will have tenant demand. That’s it!

4. Determine what spending limit you are comfortable with or require and stick to it.

You might be able to afford to buy an investment property worth several hundreds of thousands of dollars more than you are comfortable with. Be sure you’re buying a rental house that matches your comfort zone then, pull that trigger!

5. The key isn’t doing a home run the first time you buy a rental property.

But instead, to get started and not lose money! You will always be learning and changing your decision making processes, but until you take action and buy that first one, there will be nothing to improve upon.

6. Find and maintain a balance of doing due diligence and not over thinking.

When you are first buying a rental house and you start of look at all the numbers and official documents involved, it’s easy to get stage fright. Of course, check things over carefully, but there will reach a point where you must stop over-thinking or it will drive you crazy and you will end up doing nothing! If the numbers stack up – go for it!

7. Consider the 3 important elements.

Regardless of how many concerns you have or how nervous you are about buying your first rental house, it all comes down to 3 things when looking at a property:

  • Numbers: Do the numbers make sense?
  • House: Is the house in the condition you think it is and is it the type of property that will rent well?
  • Purpose: Is there something else you want to be doing in life? I’m guessing there is.

If these 3 things match up, you should probably overcome your nervous edge and get on with it!

8. Remember you’re not alone.

Everyone’s nervous about anything that will involve stepping outside of the comfort zone. Take some time, check your numbers. Gather a reliable support team (not a sales team!) around you and ask lots of questions.

9. Don’t listen to your brother, uncle, Mum or next door neighbour.

That is of course, unless they have already built a multi-million dollar property portfolio. You think you’re nervous. And yet you’ve still reached the point where you are seriously considering buying a rental house. Let me tell you – your brother, uncle, Mum or next door neighbour is even more nervous than you are – because they probably have never even reached the point you are at because they are so scared. These type of ‘helpful’ advisors can undermine your desire to build wealth and live a life you love quicker than you can say Jack Robinson.

10. Forget ‘la-la’ land.

Sitting on your coach thinking of how great it would be ‘if’ will get you nowhere. Wishing, dreaming, hoping is all great (and fun). But they won’t get you the results you’re after. They say knowledge is power. In fact it is not. Action is power.

11. Let the past be the past.

You might have had times where you have made decisions to invest your money before and perhaps it hasn’t worked out so well for you. Let bygone’s be bygone’s. Just because one thing didn’t work out well in the past, or someone else had a bad experience does not mean you will too.

[box type=”note” style=”rounded” border=”full”]Think of the reasons WHY you wanted to invest in the first place.[/box]

Remind yourself of the adventures you’ll enjoy, the time you can spend with family, telling your boss you quit.  Constantly remember the real reason you want to create wealth through property. Things won’t change from your current reality if you don’t take action.

If you don’t start now, you never will. You may feel nervous buying a rental house but there is no one else to wait for. It’s all you – and your future is waiting for you. After all…

A year from now you will wish you had started today. 

Now get out there and buy a house!

Thoughts? Leave me your comments below, and click the little share buttons below to share this post on your favorite social media channel!


 

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Darwin: A Property Investors Paradise??

Darwin:  A Property Investors Paradise?

Over the past ten years, Darwin property has certainly lived up to its name “Life at the top”. The market has been top of the class, leaving all capital cities in terms of capital growth and rental yields and offering excellent returns for investors.

Darwin is a perfect example of the investment property opportunities that exit outside major cities like Sydney, Melbourne, Brisbane and Perth.

For those in our community who invested when Darwin was first picked as an investment hot spot, the capital gains and rental returns have been exceptional.

I have sourced a comprehensive 20 page report on the statistics of not just Darwin, but also a look at the other States of Australia too.  The information is prepared by reputable experts including Herron Todd White and CommSec.

To download your copy here <Click Here>

If you like what you read and would like to see the locations revealed of ideal investment properties in Darwin  <Click Here>

Here’s to your success!

Signature_Fay

Free Property Investment Seminars – Are They A Waste of Time??

freepropertyinvestmentseminarperthYou’ve got your weekends all planned out then you open your emails and see this…..

Free Property Investment Seminar

Damn! Now you have a decision to make. You can stick to your weekend plans and keep your spouse and family happy. Or you can decide to grab a ticket to the seminar, commit to anything from a few hours one night to a full weekend to go to the free property investment seminar and start a household argument that leaves the air frosty for longer than it seems worth.

I’m a big believer in investing in one’s self education. I’ve spent thousands upon thousands of dollars over the past 10 years on travelling and tickets to events, seminars and workshops all over the world. All in the quest of knowledge and self improvement.

I love to learn more about property investing as well as other subjects that interest me and affect my life including fitness, online marketing and personal development.

As you can see, much of the information and inspiration I share on property investing is delivered to you through my blog here at PropertyInvestingSupport.com. So Darren Rowse and Fay Mclean, Problogger Seminar perthwhen I heard that a true leader in his field, Darren Rowse from ProBlogger.net was putting on an event in Perth I jumped at the opportunity to get a ticket and learn from an expert.

It was an amazing day. I got to meet and network with loads of inspiring bloggers all sharing their skills and expertise through their blogs. People like Nicole Avery from Planning with Kids and Kelly Exeter from KellyExeter.com.au and Editor of Flying Solo. And of course, I was totally inspired by Darren himself!

This was a paid event and well worth every cent. Unfortunately the same cannot be said for every event I’ve paid to attend.

When it comes to seminars about property investing, whatever price tag is attached to a seminar ticket, does not necessarily indicate the level of value that will be delivered. In fact, many free property investment seminars can deliver massive value. There are some important points to keep in mind as you see these offers come up though.

Here are some warning signs to help you recognise dodgy investment seminars and avoid being ripped off.

1.  Be aware of over-hyped and misleading claims.

Some promoters of free property investment seminars will send an ‘exclusive’ invitation through the mail to attend a ‘premier wealth event’. There will be motivational speakers and they may claim their financial secrets have the power to turn you into a millionaire within a few years.
Claims like these sound great and are almost always over-hyped or misleading. The recommended investments can be expensive, highly risky and lose you money.

In fact, the very first major seminar I ever attended was this type (not a property seminar though). Being naïve as I was, I paid out $30,000 (yes that’s right – $30K!) and got none of what was promised to me!

If there is a big upsell and sales pitch at the end of the event, then that’s the very reason the event was free in the first place. The company will be making all their money from their sales pitch. You will have been given a trickle of information to wet your appetite and if you want any more information then you’ll have to pay big time.

Solution: Keep your money in your pocket! Whatever you do – DO NOT sign up to pay out any money for information or advice on the first night. Don’t fall victim to anyone who hassles you to make big decisions involving lots of money on the spot. Go home and let the information sink in first and then make your decisions in the clear light of the morning.

2.  Constantly Changing Strategies

There are many strategies to build wealth through real estate. Many of the strategies do work well together such as renovations and sub-divisions. But when you are starting out its ideal to focus on one strategy. Which strategy you focus on will depend on your income, your goals, your personality and how far away you are from wanting to give up your day job.

Sometimes you can attend a seminar or workshop and not long into the session, your head is spinning with an overload of information. Just yesterday you really thought you were sure about what type of investing strategy you were going to follow and now….. everyone is telling you something different and your head is spinning like a yo-yo on a piece of string.

Solution:

A quick way to lose time and money in the market is to constantly jump from one strategy to the next. One minute thinking you might buy a house and renovate. The next minute thinking you want to build. While strategies such as these certainly work, if you are always out there trying to make a quick and easy financial killing, you always run the risk of your financial capital being quickly and easily killed.

If you’ve already decided you are following a set strategy such as buy and hold, then keep your head down and bum up and stay focussed. Pick your strategy and then learn everything you can about that one strategy before you move onto the next. This way you’ll gain momentum and be able to make wiser decisions as you become more educated.   Keep your eyes on the goal.

Good Reasons To Attend Free Property Investment Seminars, Events or Workshops

1.  Great Networking Opportunities

You don’t have to do this journey alone. In fact, it’s much more fun and motivating to be around other people who share the same challenges and goals you do.

At a free property investment seminar you will be in a room of like minded people and this means you’ll have a great opportunity to network and meet people who may very well be able to support you in your investing goals. [quote]Anyone who becomes successful has never done it all on their own [/quote]

The people we have met at both online and offline property events have played a significant part in our investing success. These have included researchers, building inspectors, tradesmen and joint venture partners just to mention a few.

2.  Just One Takeaway

invest in youMaximising your investments is not just about signing the contract, getting a tenant and then putting the whole thing on the shelf to take care of itself. Oh no. There is a LOT of information to keep on top of if you want to keep your expenses to a minimum, save money and increase thee overall returns from your property portfolio. And sometimes, it’s from listening to one of these free property investment seminars that you will hear the one tip that will be a major takeaway for you.

3.  Knowledge Is Power

As your education increases it’s easy to think you know enough. Wow – what a mistake!

In my opinion you can never know enough.

It is great to be led by a mentor or support person as you begin your investing journey. But it’s also important you take responsibility for your financial future. Property investing can be a little like a game of chess. You’ve got to always look at the current situation (economic) to help you decide on the best way to make you next move.

The purpose of your investing is for it to take you from where you are today to where you want to be in the future. As such, it’s going to take a little bit of education along the way. Staying up to date on information by attending events is a great way to do this. [quote]Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime. – Maimonides[/quote]

 You don’t know what you don’t know.   Think about that…..

It’s for this reason I would encourage you to attend educational and informative events relating to property investing as long as you keep these main points I’ve mentioned top of mind:

  • Tread with caution.
  • Set your intentions.
  • Know your strategy and stay focused on your goals.

How do you know what property, or which investment strategy is best for you?   If you’re looking for help with where to get started to make your next move ….  all you have to do is contact me to register for a Strategy Action Plan call.

Here’s to your success!


 

P.S.     I would love to help you take your property investing to the next level.

If you have any questions, contact me directly or leave a comment below.

10 Sure Fire Ways to Increase Your Serviceability

“How can I increase my serviceability?”

…..is a question I get asked all the time.

Once you understand the power of property as a vehicle to creating long term wealth you will want to buy one investment property, then buy another and then another. It can literally become quite addictive

Trouble is, while holding properties long term will create wealth from capital growth, having cash flow to support your portfolio is like needing to have a pulse to keep your body alive.

After you’ve bought your first or second property, you can often get stuck because your serviceability won’t let you buy more properties.

If you want to improve your cash flow, look carefully through the following strategies. Growing your portfolio further may be possible by applying one or more of these ideas.

1. Reduce your credit card

creditcardOne of the first and easiest ways to increase your serviceability is to reduce your credit card and other credit.

Your existing credit limits have a large bearing on your ability to service new loans. Having a high credit card limit can dramatically reduce your serviceability.

Many borrowers get easily confused about how a lender will treat their credit card debt (or lack of it). Most people believe it’s your credit card balance that counts but that is not the case.

Lenders will take the limit on the card as a possible debt level regardless of whether or not you pay your credit card off on a monthly basis. So even if you have a zero balance on your $10,000 limit credit card most banks will count that $10,000 as a liability.

Lenders will also assume you have a monthly debt repayment of 2%-3% of your total limit.

To give an example, if your credit card limit is say $10,000, most lenders will assume your minimum monthly debt repayment to be $200-$300. This calculation stays the same from the lenders point of view, regardless of how much you have outstanding on your credit card at the time of your loan application.

At the time of making a new loan application or accessing your serviceability, you should try to keep your credit card limit as low as possible. The key things to consider when taking out a new loan is to keep your credit card limits as low as possible.

Even inactive or unused credit cards are considered in the same way as the example above. If you own multiple credit cards do your best to cut up or cancel as many of them as you can. This will be advantageous even if it is for the short period of time that your loan application is being submitted for approval. If you have to keep one card available during the loan application period, at least request that the credit limit be reduced to as low as you can manage for that period of time.

Don’t apply for any further credit facilities such as credit cards, car loans or personal loans while you are having an increase to your serviceability accessed. All of these limits will reduce your ability to borrow.

2. Consolidate Your Debts

consolidateConsider combining any unsecured debts such as other personal loans you may have into your existing mortgage repayments. If each of these unsecured debts are listed individually you will see a high monthly total that needs to be paid out in order to reduce these short term debts.

A lender will look at these high monthly repayments and calculate this against your serviceability. They will consider each of these repayments to be less money you have available to meet a new mortgage repayment.

By rolling the debts into your existing mortgage, the repayment will be seen as one lump sum and this will immediately work in your favour to help increase your serviceability.

3. Know Your Numbers And Keep Them Up To Date

Almost every week I spend around one hour keeping my book keeping up to date using Quicken. quicken

I know how much I spend on every thing that goes on in my life (including how much all my coffees cost me!). While this may been an overkill to some – I believe it gives me massive power.

I can see areas that I can cut back on if necessary. I can notice if a change if unusual charges occur in relation to personal or property invoices. And I believe in focussing on abundance.

You might not have the same reasons as me to know your numbers but when it comes time to increase your serviceability you will be able to:
•    Provide the most up to date information possible on your income levels to your lender.

•    Complete your tax returns on time (money back in your bank account quicker).

•    Provide information on your entire income. If you are working for wages your last two payslips may not accurately reflect your annual income. And if you are self employed or relying on income from your property portfolio like me, you will need to be able to see your annual income.

4. Join With Your Partner

If you have previously loaned money in just your name you can increase your serviceability by joining with your partner this time around. Including your partners income in the loan application will boost your serviceability. Understand of course that your partner will also then also become responsible for the debt if a new loan is approved.

5. Split Liabilities With Your Partner

In the exact opposite to the above strategy – you can split the liabilities for some of your expenses with your partner. You will need to be buying a property only in your name for this to work.

Provide proof in your application that your partner is responsible for certain obligations and you may be able to increase your serviceability.

For example, you could show that your partner supports – and will continue to support – your dependent children and the lender may disregard any financial costs associated with their care.

6. Get The Right Product For You

There are so many loans on the market now it’s like a smorgasbord. And each new product comes with its very own features. Every lender has their own criteria and guidelines when it comes to approving loan applications. This is where a broker can be of such a help to you. They know and understand each of the lenders requirements and can match you more easily with a lender whose guidelines you meet.

Many features of products that can mean you either are or are not able to service a loan include:

Not every bank will access your income in the same way. Some lenders will require you to have been employed in the same job for a longer period of time than another lender. Some lenders include certain types of income such as government benefits whereas other lenders may exclude them.

If you want to seek every possible opportunity to increase your serviceability, work with a reputable broker who can really shop around to find the right product for you.

7. Keep On Top Of Your Existing Interest Rates

If you can get a lower interest rate for any existing loans this is going to mean lower repayments. Lower repayments will help increase your serviceability!

While the RBA interest rate has remained steady for a long time now, we have personally telephoned our bank three times in the last twelve months to request a reduction in our loan interest rate. Every time it has been granted! You must stay active in pursuing every avenue open to you to maximize your profits from your property portfolio. Keeping on top of your existing interest rates is a way to easily keep more cash in your bank account.

8. Pay Interest Only

Not everyone is aware that lenders will nearly always allow you to make interest only repayments on your loans. The first loan many people have is for their principal place of residence (PPR).

While you can pay principal and interest to help reduce the overall debt, it is also common to request your mortgage repayments be interest only; even if it is your PPR.  This will mean your monthly repayments are considerably lower than if you were paying principal and interest.  Lower repayments equals great serviceability next time round.

9. Stretch Your Loan Term Out

Stretch your existing loan to increase your serviceabilityMost mortgages have a loan term of 25-30 years. Some lenders will agree to letting you extend this out to 40 years. This 10 year difference can make your repayments hundreds of dollars less each month. If you need to increase your serviceability you might want to have a serious conversation with your existing lender about this option.

Extending a loan like this will mean your overall interest paid is more but it could be well worth it if it means you’ve been able to access additional funds to propel you further into the property market.

Being able to secure and hold an additional property that has good capital growth potential might far outweigh the additional interest you pay on the extended loan.

10. Save…And Then Save Some More!!!!

If you’ve set a goal for what you want to achieve, it will be easy to be determined with this strategy. It is also easy to implement and requires the very least effort of all.dollararmy

Establish a budget and keep track of your spending. Allocate a certain amount of your income regularly to a savings account.

Aim to save 10-25% of your deposit. The amount you will need will vary depending on which product your mortgage broker considers best for you. If you’re using equity from an existing property, it’s still a good idea to save up a nice stack of cash before applying for your loan.

Careful planning, debt reduction and consultation with your broker and key factors to increase your serviceability without having to make dramatic changes to your existing lifestyle.

Start working on these strategies today and speak to a reputable broker  to help you calculate how much you can borrow for your next property

 

 

Cheers, and I hope you enjoyed this post! Let me know, and please share if you’d like! icon_smile

 

Line of Credit: Important Tips for Managing Your Line of Credit

Important tips for managing your Line of Credit

Line of Credit for Property InvestingManaging the cash flow and allocating appropriate spending in your Line of Credit (LOC) loan is very important, whether it’s for personal or investment purposes.

I would always highly recommend that if you have a Line of Credit set up, that you use it solely for the purpose for which it was originally established. This could be either for personal purposes or for investment purposes.

By correctly establishing the separate loan types into what is personal and investment right from the start, you’ll be able to easily identify which interest expenses are tax deductible.

As soon as you start to pull money in and out of an investment Line of Credit for personal expenses and then repay personal money back in, you start to get into all sorts of mess. And this mess ends up having to be sorted out by your accountant so he is claiming the correct amount against your investment. His extra time and effort will hit your hip pocket in the form of higher fees. So do yourself a favour and stick to the rules on this one!

Line of Credit for Investment Purposes

An investment Line of Credit should be used to invest in assets that appreciate in value. Any properties you buy are a typical example.

You can use your Line of Credit to help meet some of the costs associated with your investments. This will reduce the amount of cash you need to use from your personal savings or regular income.

During any twelve month period there can be large expenses associated with holding your properties such as rates and taxes or an unexpected maintenance issue. Even the lack of a tenant can put stress on your regular income. These are times when it can be useful to have a Line of Credit set up that you can dip into to meet these costs.

Your Line of Credit would also be the account where you deposit your rental income as well as place any tax refund you might get as a result of holding an investment property. Your Line of Credit can also be ‘topped’ up by transferring a set amount of your regular weekly income over to help with the running costs of holding your investment property.

Line of Credit for Personal Purposes

Typically, you would deposit your wages and investment property tax savings into your personal LOC.

However, these investment property tax savings may need to be transferred over to your investment LOC from time to time, to ensure the longevity of your investment LOC.

If you have an LOC set up for personal use, then any interest charged by the banks on this account will not be tax deductible* and will be just like having a credit card bill.

Important things you should know about Line of Credit Loans

Interest will accrue on your LOC and one thing that most borrowers rarely realise is that when interest rates rise and the interest continues to accrue, there will start to be a draining effect on your LOC. If you are not aware of this or you don’t manage it carefully, this situation can quickly bring you to your LOC limit.

You have extra take home pay because of your investment properties. This should not be spent and should be invested back into your line of credit or better still to reduce your bad debt – your home loan.

A Line of Credit requires Discipline!

These types of loans require financial discipline and good budgeting skills to stay within your financial limits. They are a little bit like having access to a credit card with a huge limit.

If you have a LOC set up to help manage your property investments, its rule number one that you must NOT dip into this account for personal spending.

A big mistake many investors make is they see a nice tidy sum of money sitting in a LOC readily accessible and then decide they need a holiday or they want to buy some new expensive ‘toy’. Next minute – boom! The line of credit balance drops and before long they can find themselves having difficulty with the holding costs of their properties and now have no surplus finds to assist.

When a LOC is set up to assist with your property investments it must only be used for that purpose.

Be sure to keep in regular contact with your bank to ensure you are receiving the best interest rate possible. Just this week, for the second week in a row, we have been given a reduction in the interest rate we are paying on some of our loans. I wrote all about it here last week.   I’ve just updated the post to include our most recent reduction.

Line of Credit interest rates

On that note, I’d like to remind you to constantly review your finance structure to be sure it is as optimized for your investing. You can always have a free, no obligation review with the team at eChoice.

*The information in this article is not meant to replace professional advice.

Here’s to your success!

Fay McLean

 

 

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How You Can Reduce Your Interest Rate – Today!

reduce your interest rates downReduce Your Interest Rate Down

One of the main purposes of this website is to help you maximize the profits you make from your property investing. And that means sharing with you the things you need to keep a close eye on as they relate to your properties. Things like – how you can reduce your interest rate today!

If you’ve been reading my blog for any length of time, you will know I’m always talking about how important it is to know your numbers. Knowing and understanding where you can continually extract more income from your portfolio is part of your learning journey.

Some people have the attitude that saving or earning an extra $10 or $20 dollars here or there is not important but I’m sure you’ve heard the saying before [quote]“If you take care of the cents, the dollars will take care of themselves.”[/quote]

Let me ask you a question…. If you found a $50 note lying on the pavement without an owner and picked it up – would you think it was your lucky day?

lotto winLoads of people spend a fortune week after week buying lotto tickets just waiting for a win. Imagine if you had a ticket and when you got it checked to see if you had won anything you heard the bells sounding off like they do when there is a winning ticket. The cashier tells you that you’ve just won $600!!! Wow – how cool would that be??

Well, you can get yourself a ‘lucky day’ feeling easier than you think….. all you have to do is make a phone call to your bank. Here’s why…

As savvy investors, we are constantly keeping a check on how to reduce the interest rates for our property loans and requesting they be reviewed.

And so the other week DH (Dear Husband) made a phone call to one of the banks we have a substantial loan with and simply requested a review of our interest rate. And he got jackpoticon_smile

A reduction in our variable rate from 4.95% to 4.85%.

For the level of loans we have with this bank, this equates to a saving for us of $600 per annum.reduce your interest rate

The reduction in the interest rate may not seem like a big thing but if the $600 was a lotto win I doubt there would be anyone that would snub their nose at being excited over that.

The ability to negotiate your interest rates and have them reviewed is a win for you as a savvy investor. It’s an example of how you must constantly ‘work’ your portfolio to gain maximum returns.

Having a portfolio of ‘buy and hold’ type properties doesn’t mean you can forget all about them once you’ve gone past settlement. Investing in real estate is a business all of its own and even if you work at another job, you must make time for your portfolio if you want to maximize your profits.

Three main areas that need regular attention are:

  • Interest rates
  • Maintenance
  • Rent review

In regards to your interest rates, if you have your loans at a variable rate then make a note in your diary to call each bank you have loans with and ask them to reduce your interest rate. Do this at least every twelve months, if not more often.

We make a call like this to our banks regularly. Every time, we get rewarded with a small interest rate drop regardless of where the market rate is.

Unfortunately you don’t have this luxury if you have decided to lock your interest rates into a fixed rate. If you need to check on whether you want to stay at variable rates or lock into fixed rates, it’s a good idea to chat this over with a reliable broker.

Why Is It Important To Reduce Your Interest Rate?

The interest you pay on your property loans is one of the biggest expenses you will incur as a property investor. So it stands to reason that whenever you can get a reduction in what you are paying, you are saving money.

Even if the amount you save is small or if you already have enough to pay for your properties, saving money is important.

Here’s a few reasons why:

1.  Save for an Emergency Cushion

It’s always comforting to have an emergency fund set aside that will cover unexpected expenses for your property portfolio. This could be any number of things; a new oven, replacing or installing air-conditioning, an extended period of time without a tenant or even loss of your job.

2.  Another Deposit for Your Next Property

Every bit of money you can put aside or save will get you to your next deposit even quicker. The quicker you can get into the property market again, the sooner your financial wealth can start to increase, the sooner you’ll be able to live a freedom lifestyle.

3.  You Can Only Spend Your Money Once

Once it’s gone – it’s gone! I believe in abundance and know that money can be made over and over. But it’s a whole lot easier not to spend it unnecessarily in the first place. Regardless of whether funds for your properties are coming from the bank, a joint venture partner or your own funds, everything that is spent on your properties is less you have to spend on something else you would love to be doing. Spend wisely and save madly.

People who regularly save and invest are the ones who end up being wealthy.

Hopefully if you are reading this blog, you are someone who falls into both of those categories. If so, congratulations!! You are on the right track  icon_smile

It is important that you trim your spending and save where you can so that you can really begin moving forward and acquiring wealth.

Today’s action step: Make time in your diary to go and call your bank to request a review to reduce your interest rates.

UPDATE TWO WEEKS LATER:

We did it again!! Another $678 in our pockets.

Have you ever been into a store to buy something and asked the retailer if they could match the price you were quoted for an item you saw down the street? I bet you have. But have you ever thought of doing the same thing with your bank?

Last time I posted telling you how Murray and just negotiated a reduction in the interest rate we are paying on our loans with one bank. Then this week, he went to another bank we also have loans with and told them we had just got a reduction on interest to 4.85% with another bank, and he would like to request they matched it.

To tell you the truth, we really didn’t expect a positive response because our broker had already negotiated a reduction on rates with this same bank only three months ago. But it’s always worth a try.

Well, how pleased were we, when after a day or so thinking about it, the bank came back and said YES!!

Score!! – That means over the past two weeks, we have negotiated a saving of over $1200 per annum in interest payments. That’s money we get to keep in our pockets rather than the banks getting it.

Imagine what it would mean to you if you could save $1200 each year by doing so little. That’s extra money you could put towards further investments, paying school fees or taking a family holiday. Either way – it certainly goes a long way to helping you enjoy a better lifestyle and have more freedom of choice.

Now if you didn’t take action last time – and you don’t take action this time – then perhaps you’ve got more money than sense. Or, you’re not really serious about maximizing your property investments. Seriously – today or tomorrow you’ve got to make the time to put a call into your bank to request your reduction in interest rates.

 

 

P.S. Be sure to check back here and comment to let me know what the results you get.

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The Most Asked Question: Where To Buy Property?

where to buy property

Where to Buy Property????

Of all the people buying property in Australia at the moment, one in four buyers are looking for investment properties.* Each and every one of them will ask the same priority question – where to buy?????

[box]You’ve heard it said before – “location, location, location”![/box] This old saying is especially true when it comes to buying investment property. If your investment strategy is one of buy and hold in order to achieve capital growth, then your property must be in a location where there is high demand. Demand is directly related to location. So to maximize your profits from property you must buy the best property you can afford in the best possible location.

Here are the steps to follow when choosing a  location to buy property:

Step 1
Learn all you can about the area your looking at. Getting a good sense for what is going on in the area is vital. Get into conversations within the community. Chatting to people like the local corner store, newsagency, local coffee shops will give you loads of ‘insider’ information that can be invaluable. Stop by and spend time with local real estate agents, look through some other home opens and really immerse yourself in understanding all you can about the area.

Use the internet to add to your collection of knowledge of the area.
Sites like house.ksou.cn and onthehouse.com.au can help you to find the price of properties after they have been sold which is often useful.

Step 2
Look for the ‘ripple’ effect. A ‘ripple’ is the area that is next affected by something else. For example, if you take a beach area that is too expensive to buy into, the ripple effect will be the next suburb out.
Inner city buying has always held good returns for investors and quickly becomes unaffordable. On a map, draw a circle that indicates a 5km radius from the city centre, then focus your attention to the next ‘ripple’. That is, the next 10km out. This will still be a good location to identify potentially great deals.
If dwellers can’t have the ‘cherry on top’, then they will always want the next best thing. And that next best thing is often found in the ‘ripple’ area.

Step 3
Look for well established suburbs. These areas have been lived in for a long time and new pieces of land are extremely hard to find, if not impossible. Land sizes are often bigger and have more potential for development. Facilities and infrastructure are all in place and these suburbs are generally highly sought after as places live. This demand will continue to force pricing upwards.

Step 4
You’ve got to buy a property that is close to facilities and infrastructure. When we bought our unit in Churchlands, Perth these were some of the benefits:

  • 200m from a popular small supermarket, newsagency, postoffice, chemist and takeaway food facility. unit churchlands perth
  • 2 main shopping centres – 1 is 2km distance and 1 is 8km distance
  • Bus route right outside the front door to universities, beaches and city
  • Coffee shops across the road
  • 6 mins drive to the City Centre
  • Primary and Highschool within 5 mins drive
  • Two quality beaches within 6 mins drive
  • Local parkland and walking trails 100m away.

These are the exact facilities and infrastructure that buyers and tenants will be looking for. You want to be able to mark off all of these items against any property you are looking to buy.

Step 5
Consider suburbs that are in your price range. Using the ‘ripple’ effect, you may need to go just outside of a hot spot in order to find properties within your budget. Research street by street because while most of a suburb may be out of your reach, there can always be hidden gems to be found if you look closely enough.

Step 6
Look at suburbs that are going through a rebirth. Strongly consider areas that have older buildings that you notice are starting to be replaced with newer ones, or redevelopment. Use data from sources such as RPData, Suburb Reports: Movers and Faders and the local Council to gain an idea of the demographics of an area and see if you can buy a property that is suitable to renovate to the newer demographics of an area.

Step 7
Councils don’t plan on spending money for roads, rail, sporting complexes or other upgrades if they don’t see the demand for it. Make the local Town Planner your best friend! The local planner will share with you what new infrastructure is planned and this will give you an idea of how quickly the capital growth of an area will happen.

Step 8
Look for where big companies are spending their money. Companies like Dome, supermarket chains, Bunnings, McDonalds and others will only set up shop in areas of high growth.

First the suburb – then the street!
Once you’ve nailed your ideal suburb, then drill down to find great streets. Every suburb will have it’s high and low end areas. Go through the same type of considerations mentioned above to help you decide on an ideal street such as your price range and meeting market demand in relation to the demographics.
Talk, look and most of all listen to what locals have to tell you.

Having struck up a good relationship with local real estate agents, you will often find they will alert you to a good deal even before it gets to the market. Either way, once you reach this stage you’re ready to take the next leap and buy a property.

Your journey has begun – and after this one, I hope there will be many more icon_smile

If you’re still wondering if investing in property is even a good idea at all, you may want to go back and read this article: http://propertyinvestingsupport.com/why-invest-in-property/

* Australia’s largest mortgage broker, AFG

Here’s to your success!

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P.S. Look for support as you make your buying decisions by joining our community here. Click the Join Us Here button below and I’ll be here every step of the way to help you build a portfolio and create freedom and adventure in life.

What Dieting And Buying Rental Property Have In Common

 

What Dieting And Buying Rental Property Have In Common

Could dieting really be anything like buying rental property?  

I’m one of these people who only have to look at food to gain weight. Maybe you’re like that too? In fact, my tendency to gain weight so easily is the main reason I’ve developed a lifetime habit of regularly working out pretty hard for six days of the week.

I’ve just returned from a fabulous holiday to New Zealand where I (abnormally) did no workouts at all except for some days skiing and the usual walking to see attractions. Add to this the fabulous chocolate café we discovered together with the delicious ice-cream in New Zealand – and it’s a recipe for a waistline disaster!!

Back home and the dial on the scales has shot way up and all my clothes are far too snug!

Then it hits me – BOOM – time to take serious action!

You might already be wondering what the heck this has to do with your progress as you work towards buying rental property. Stick with me here for a bit and you’ll see……

So I start to ask myself “Exactly what changes do I want?”

To tone up and lose centimetres from my middle? To drop 5 kilograms? To run a half marathon? These are important questions because unless I can answer specifically, I won’t know the right action to take to achieve my goals.

I’ve decided that my focus needs to be on following a healthy eating plan and avoid the sugars (I love my lollies and icecream!).

So next decision is what ‘diet’ should I follow? Lots of diets to choose from: low carb, sugar free, calorie counting, weight watchers and loads more. It’s important I choose the right nutritional plan. For example, I wouldn’t want to be eating a low carb diet if I expected to be running a half marathon again any time soon.

Now I’ve got my objectives worked out and how I plan on achieving them. But I’ve learnt over the years that I get the best results when I have some sort of support or accountability. I know I’m going to need help. And asking for help will mean I’ll reach my goals a lot faster too.

I love taking sessions with a personal trainer or joining group classes at the gym for motivation and inspiration. I’ve already pulled out some editions of the fitness magazines I’ve got to help me design a variety of workouts and I was back cycling with the group this morning even though it was only 1 degree outside. But – sometimes you will find there is a little bit of pain associated with getting the results you are after icon_smile

It’s going to be so much easier to have the support of other people around me.

You can probably start to see the similarities coming through here now because you will go through exactly the same decision making process at some time during your investment journey.

Buying Rental Property Can Change Your Life

There will be a moment when you finally make and commit to your decision to take some serious action.

For me, that moment was when Murray and I looked desperately at our property spreadsheeet. And saw for one time too often, the figure of almost $70,000 it was costing us to hold our negatively geared property portfolio.

Thankfully, we were finally jolted into action and knew that serious steps needed to be taken to turn the situation around.

bigproblemPerhaps for you it’s the day you finish work so late or feel frustrated and ‘snap’ to the decision that you are going to change your financial situation. You recognize that serious action needs to be taken to change your circumstances.

Once that decision has been made you also need to decide exactly what results you actually want to achieve. Do you want to create a passive income of $100,000 per year? Do you simply want to have access to an additional $5,000 per month? Do you want to pay off your principal place of residence (PPR) first?

Being clear on what results you want will help you decide which investment strategies will work best to achieve your objectives. Becoming involved with property development is quite different to renovating a run down cottage which is quite different again to buying a newer townhouse that is already tenanted.

And all of these strategies will provide different financial returns. So you might start to feel a little confused at this stage. Not sure which way to turn. Maybe you’re unsure exactly what location to buy a property. Perhaps you don’t know how much you could afford to pay for a property.

It’s time to find the trainers, mentors and support groups that can help you with your buying decisions.   Without this kind of support your journey can be a long, slow and painful one.

But when you find a good support crew, turning around even the most difficult situation can be exciting, fun and extremely rewarding. And, you’ll get the results you are after so much quicker too!

Researching, reading books, attending seminars and workshops are all great (and I encourage all of them). But eventually you need to take action.

One of the things that prevent most people from investing in property is fear. But if you look at things realistically, you can see that the process is actually no different to making a decision to go on a diet.

Understanding this will help take some of the fear out of your investing decisions or how you think about buying rental property. After all – no one gets fearful about starting a diet…. Do they?

Taking that next step is sometimes the hardest, and I want you to know I’m here to help you all the way

What about you? What is preventing you from moving forward with your investment plans?

I challenge you to schedule in some time to “take the next step” this week… and let some magic happen.

Leave a comment below with your best method of overcoming your fears, or your experience with this simple creative thinking exercise. I’d love to hear what works for you and/or your experience with “changing your thought process”!

Here’s to your success!

p.s. It can be really helpful to get an outside perspective, to brainstorm with someone else who may add ideas to yours, or to get feedback on your investment plans. I offer creative ideas, creative angles, and new concepts to consider in our regular emails and on our Facebook page. Join us! I’d love to help YOU spark some action plan ideas in your investing journey.

If you prefer one-to-one discussion, the Wealth Building Strategy Call is a great alternative! There are currently a limited number of complimentary call sessions available. To apply for one of these complimentary sessions, click here.

Tax Time!! What Do I Need To Take To My Accountant?

tax timeTax Time!!

If you are on top of your game you’ll already be asking yourself what do I need to take to my accountant to maximize tax deductions for rental properties. If you’re part of the majority – you’ll be quaking in your boots at the thought that it’s tax time once again!

end of financial year salesI spent last weekend swooning around the city shops spending up big in the end of financial year sales. This weekend was struck with reality and the need to finalize my own book keeping before it’s time to visit my accountant.

My dear old father in law never used anything except the good old ‘spike’ to keep his receipts on – bless him. I prefer something I little more comprehensive  icon_smile

This financial year we had 10 properties in our portfolio. Whether you’ve got one, ten or more investment properties, you’ve got to have an organized way to keep track of all your paperwork and finances.

I’ve developed rock solid systems for our investments and business and I have the tools and reports I need to keep track of them.

For years now I’ve used Quicken to keep all our financial records. I love this system. It’s a simple and user friendly way to keep track of income and expenses so you stay on top of your book keeping for tax time. The system also allows for plenty of reporting and budgeting if you want those sort of features too, but I like to keep things as simple as possible.

Getting your tax done by a professional accountant who is familiar with property investing will maximize tax deductions for rental properties and help give you a stress free experience.

There are some fundamental documents and pieces of information you can make sure you have before you visit the accountant. Being prepared will help to keep the cost of your visit down as most accountants will charge you by every minute they spend working on your tax.

Here’s a list to help you get organized and gather the things you need.

Figures and Documents Your Accountant Needs

Asset Register

If you don’t have one of these already, I suggest you make a fresh start on one of these for the new financial year. It’s a register that lists ALL of your assets, including your properties.

In this register you will list the name of every asset you buy, the date of purchase and cost.

You can claim depreciation on your investment properties (and perhaps some of your other assets). Having a register will give you a handy reference for your accountant, and whenever you are required to list your assets, such as on loan applications. Having this register was a blessing when I had a recent telephone call with a broker who wanted all our assets and liabilities.

An asset register is not an essential item for your accountant, but believe me when I say it will make your life a lot easier.

Do the work once and use it over and over again.

Settlement Statements

If you have sold any of your investment properties during the last financial year you will need to take along your Settlement Statement. This will have been sent to you by your solicitor or conveyancer who acted on your behalf at settlement. It will list all the amounts of sale, stamp duty, charges and other important information your accountant will need.

Loan Interest

You’ll want to list all the interest payments you have made on any of your investment property loans.

If you are in the unfortunate position of having some of your properties cross-collateralized, then be sure to divide up the interest payments and allocate the right proportion to each individual property.

Accuracy here helps you determine the true yield or return on investment of each individual property.

Expenses: Travel, Maintenance, Repairs

Some minor expenses for your investment properties may have been paid by your property manager directly. In this case, they will show up on the Property Management Report. You may also have some invoices and receipts for expenses you have paid directly. List these expenses against the correct property.

If you have travelled to see your property at any time (after settlement) it’s likely that you can make a claim against your out of pocket expenses for the trip. Keep and document all fuel, accommodation, meal and other incidental dockets in relation to the trip. Your accountant will determine which of these costs can be claimed.

With properties in our portfolio all across Australia, we can offset some of the expenses on most of our travel against one or another of our properties. Have a good discussion with your accountant on this matter so you know in advance what is claimable and what is not. Often you need to know before you travel so you can be sure you have the correct records to verify your claims, like emails to managing agents or tenants to arrange the visit etc.

Property Management Statements

Most real estate companies are fairly prompt with sending through the end of year Property Managing Statement. This will list all the rent received, any expenses they have paid on your behalf. It will also list their managing fees. Your accountant will need all these figures to complete your taxation return.

Depreciation Report

After you settle on a property, you should order a Quantity Surveyor to complete a depreciation report. The report takes into consideration two main elements:

  • Capital works allowance; and
  • Plant and equipment.

From this report, your accountant can make a calculation for an ongoing tax deduction year after year for a limited time.

The first time you include a newly acquired investment property in your taxation claims, your accountant will need the Depreciation Report to refer to. From that point onwards, calculations can generally be made based on the previous years taxation records.

I love to maximize tax deductions for rental property. Our property portfolio has helped us legally reduce our tax by thousands of dollars over the years. This is a good checklist I use every year as I gather what I need to take to my accountant at tax time. I hope you find it useful too icon_smile

I’m happy to pay tax, but see no point in tipping the tax man! What about you?

Leave a comment below, and feel free to share this information with others who may find it useful.

Here’s to your success!

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