19th Jun, 2006
Many vendors are reluctant to hand over the marketing of their home to anyone. They feel as anxious as parents teaching their teenagers to drive. Will the agents remember to engage the clutch when they unlock the front door? Will they leave a window open or shut the cat inside? Vendors since time immemorial have anxiously checked and cross-checked every detail of the marketing with their agent. And it is always good to check – especially if this provides the reassurance they need.
But there is a time for vendors to stand back.
Vendors who stick close to prospective purchasers inspecting their home do so with the best of intentions, thinking their knowledge and input are essential. After all, no one knows the home like they do. But their subjective, detailed commentary often has the opposite effect to what it was intended to have.
In most cases, direct contact between vendor and purchaser results in lost opportunities, especially when purchasers are put off the property by too much information too soon.
It is not uncommon for vendors to anticipate and answer objections before they are voiced and in so doing highlight negatives purchasers have not even thought of.
For example, vendors conscious of the fact that their home is near a school might say: “We hardly ever hear the children. They’re only outside for half an hour before school, during recess and an hour at lunchtime. It’s nothing.†The purchasers, in reality, might not have paid much attention to the school’s proximity, especially since it is not recess or lunchtime at that moment and because they are still at the stage of picking up a more general impression of the house itself. Their attention is drawn from the general to the specific before their emotional connection with the property is fully established. They are asked to concentrate on features - negative ones at that - at a time when they are still in the initial stages of embracing or rejecting the “feel†of the property. Even if they noticed the school in passing, they may not have thought about the specifics of how that might affect them. And in spite of the school, the house might still be the right home for them, just as it was for the current owner, but if they don’t “connect†with the home and imagine themselves living there before facing the practicalities, they are unlikely to move on to the next stage. Any excitement the house might be generating is lost in the prosaic detail of day-to-day living.
Vendors who hover during inspections can also make buyers uncomfortable. It is harder for them to ask the agent for the very details they do want to know. They are less able to make themselves at home and their attention is sometimes on small talk rather than on the property. And it is much harder to imagine themselves as proud owners while the real owner is busy being proprietorial.
Of course it is important for home sellers to be connected with the selling process and even more important that they can see that their agent is doing the right thing on their behalf. The best way to stay involved is to choose an agent they can trust to show their house to the best advantage - and one they know will communicate with them every step of the way. Professional agents report that vendors who are kept up-to-date with the details of inspections, experience less stress and better sales outcomes.
1st Jun, 2006
When buying an investment apartment, location is important but so are your property?s aspect, views and features. An ordinary apartment is harder to lease than a distinctive one that offers some charm. A quality property in a quality location will also deliver capital growth in the medium term.
But with the REIA reporting that the rental vacancy rate for the March 2003 quarter was 3.9%, down from 4.5% for the December 2002 quarter, what can you do if your investment property falls vacant for a month?
Use the vacancy as a chance to catch up on maintenance and minor improvements. Painting the walls and updating the bathroom mirror and professionally cleaning the carpet, windows and stove may make your property more attractive to renters. Accepting a lower rent for a longer lease is another option. Ideally, arrange to have a lease expire in November or mid-January rather than early December, when it?s often more difficult to find tenants. When renters have many premises to choose from, make sure yours presents well, is priced fairly and is well marketed.
25th May, 2006
You can streamline your house-hunting. Here?s how:
* Work out how much you can afford to borrow before you start looking at properties.
* Take into account what your monthly or fortnightly mortgage repayments, ongoing property maintenance and rates will be and to these add your other living expenses.
* Get pre-approval from your bank or mortgage provider before you start your search. Then you?ll be able to make a genuine offer when you find a property.
* Make a short-list of the essential features you want in a property. Include location, number of bedrooms, bathrooms, parking, outdoor living space and stick to your requirements, that way you won\'t be swayed to buy something that doesn\'t exactly suit your needs.
* Use websites such as natgroup.net to help you narrow down your search. You can search under multiple criteria?s including your price range, number of rooms and location.
* When you?re out inspecting a property, take notes or even a photo of each property to help you remember what you thought of it.
* Take your time in considering each property you inspect. But remember that the first one you see could be the most suitable.
* Too many people keep looking, miss out on the first one and then end up comparing all properties they see to the first one they missed out on.
* If you?re serious about a property, expect to pay approx. $300 for a professional building report and approx. $160 for a pest inspection report.
* Clarify rates and other maintenance expenses on the property with the agent.
* Consider the property?s potential, especially its location, layout and size.
* When you find a property that suits your needs, make an offer which is fair and in line with recent sales in the area.
9th May, 2006
Buying a home is one of the biggest financial decisions people make in their lifetime and purchasers sometimes lack confidence when making their final choice. Having started out with a ?wish list? they find themselves sacrificing up to half of what they originally set their hearts on.
Many purchasers get confused about their priorities, especially if they ?fall in love? with a property even though it does not actually meet many of their more practical needs.
The best way for purchasers to end up with their ideal home in the long run is to buy prudently from an investment point of view and plan to get their ultimate choice second or third time around.
Look for the best location you can afford, rather than the best house. After all, a house can always be enhanced as the land values increase and confidence is gained that such improvements will not over-capitalise the property. A poor location (e.g. busy road) limits the price of a home no matter how many improvements are made. Decor, even house style and size can always be changed or improved but location and land size (apart from extraordinary circumstances) are basically there forever.
27th Apr, 2006
Most investors agree that successful ownership of residential rental property is all about maximising long term net income.
Novice investors and property managers often simplify what that success is all about and focus on the amount of rent being achieved right now. Most experts, however, agree that setting rent at 95% of market value usually achieves a higher income long term than holding out for 100% or more. Tenant harmony is a crucial part of the income equation and tenants paying top dollar are more likely to be finicky about the standard of the property and make more demands for repairs and improvements. Furthermore they are likely to start looking around to see what else is available for the money and move on if they find better value.
Investors who do their sums soon work out that the more often a property is vacated, especially if the advertised rent is high, the more chance there is of further vacancy and loss of income.
Even a few weeks vacancy per year can significantly reduce the investor\'s return, thereby requiring an even higher rent to make up losses and establishing a negative pattern.
Also often poorly handled by novice investors is the market rent review. Property investment managers carry out market rent reviews on a regular basis and the rents are raised according to supply and demand. Novice investors often think the best approach to raising the rent is to make frequent small increases, but these are seen by tenants as penny pinching and lead to disharmony, increased demands for repairs and higher vacancy over the long term. Experts say that in most cases rent increases should occur when market indicators show that a 5% increase is warranted.
Many novice investors end up handing over to experienced property managers simply because they realise they are too emotionally involved to be objective. Later they realise that the most stable income and long term optimum return is gained by following the advice of the experts they have selected to manage their investments.
17th Nov, 2004
WHAT IF MY AGENT SUGGESTS SELLING BEFORE AUCTION?
Sale of property by public auction can be an intimidating process for vendors who are doing it for the first time, yet it is the marketing method preferred by many. Auction aims to contain the stress and inconvenience of selling within a three or four week period, thereby giving vendors more control over the timing of their move and any subsequent purchase. The sale date is set in advance, and prospective buyers have a deadline to make a decision and come up with the finance.
Naturally there will always be those who prefer to sell their property by other methods, and most decisions regarding the marketing of any given property can and should be determined by a look at a combination of factors including the state of the market, the type of property, and the vendor’s needs. These issues can be best determined by discussing your individual circumstances with the agent you have chosen to represent your interests – the expert who knows the facts and figures pertinent to your local area and current market.
But what happens if you decide auction is for you, and your agent turns round and suggests selling the property during the auction marketing period, before the actual auction date? Why would a vendor decide to sell before auction after choosing auction as the best marketing method and setting the auction date to co-ordinate perfectly with other events in their life?
Sometimes a buyer who sees the property during the auction marketing period is unable or unwilling to go to the auction. This buyer may be prepared to pay serious money just to secure the property before auction, yet might insist they will not go to the auction on the day, let alone make a bid. Perhaps the buyer is simply going to be unavailable at the time of the auction and does not want to let someone else bid on their behalf.
In these circumstances, if the agent’s feedback indicates that none of the other buyers is likely to match the pre-auction buyer\'s offer at the auction itself, the agent may suggest selling before auction as the best way to get the highest price. In these circumstances, the agent will insist the purchaser exchange contracts (just as on the auction day itself) as the only justification for the extreme measure of bypassing the auction process altogether.
11th Oct, 2004
One of the greatest causes of vendor stress in sale by private treaty is an offer falling through before contracts are exchanged.
There are many reasons why potential purchasers fail to cross the finish line, but experienced agents are more skilled at detecting and eliminating high-risk offers. While agents are bound by law to submit all offers presented, experienced agents minimise vendor disappointment and loss of marketing time by advising clients not to accept offers they know are unlikely to proceed.
Sometimes offers are made by intending buyers who have not yet placed their property on the market for sale and who need the finance from the sale of that property before they can complete their next real estate purchase. Buyers in this category are most often (not always of course!) just beginning to assess the market. They have found a house they really like almost at once and before they are ready to act. Often they have not done enough homework to know market values and their offers are not based on a genuine understanding of the current market.
Some continue to look around while waiting for their own home to sell, even though they have agreed in principle to buy another property. Such purchasers are not deliberately trying to deceive or inconvenience property sellers when they pull out of a sale - they were simply too inexperienced and eager when they made their offer.
Some purchasers offer to get bridging finance so they can proceed immediately; however, vendors should realise that in most (not all of course!) cases, the cost of bridging finance and the “what if” factor of not knowing what their own home will ultimately sell for, end up working against the sale.
Since professional real estate agents will advise against taking a property off the market upon the receipt of offers from unqualified purchasers, no loss of time or money is incurred. The harm done by uninformed purchasers who retract high offers is more insidious. Often the offers made by purchasers who have not really researched the market are higher than the property’s ultimate market value; in other words, the price is above what the vendor can realistically expect to achieve. Unfortunately, the effect on the vendor’s expectation is lasting. Most vendors continue to measure all subsequent offers against the high one, even though it fell through.
In the anxiety of undertaking what for 97% of people is their biggest ever financial transaction, it is easy for vendors to forget that no mere offer in itself actually represents market value, let alone a firm sale price - until a qualified purchaser backs it up with cash. If vendors could dismiss unrealistically high offers with the same incredulousness that they dismiss unrealistically low offers, they would sell faster and for a higher price in the long run.
11th Oct, 2004
The idea that property investment is only possible for those on high incomes has become such a commonplace that it appears to need no explanation. “Landlords” all live in homes with ocean or harbour views, drive expensive cars and have several exotic overseas holidays every year.
Like all stereotypes, the landlord stereotype is a simplification that often keeps us from seeing things as they really are. In fact, statistics show that most Australian residential property investors are ordinary wage earners - family people preparing for their retirement.
How do they do it? The typical couple might start by buying their own home or apartment for say $400,000. To do this they have probably saved about $60,000 deposit including stamp duty and legal fees. Let’s say their combined income is $65,000 - the main breadwinner bringing in $40,000 and a part time working spouse $25,000.
Depending on income and expenditure it may take the average couple ten to fifteen years to pay off their home. The family home usually needs to be about fifty percent paid off before the owners can start buying investment property.
Most people should be in a position to start talking to their accountant and shopping around for finance after about ten years. By then their home should have doubled in value, increasing their equity and making the remainder of the loan a proportionately smaller amount of the total value of the house.
Depending on lifestyle and expenses, most couples with two average incomes could buy another investment property every two to five years. Rents go up but repayments stay the same, (provided you choose the fixed-interest loan option). Most people are ready to buy again when rent on their first investment increases sufficiently to cover repayments.
Rate of acquisition will vary from family to family depending on a host of factors, * but most people starting to buy investment property between the ages of thirty five and forty could end up with a portfolio of between five and ten properties by the time they reach fifty five.
*(Those wishing to start investing in property should consult their accountant and banker to determine their individual circumstances).
11th Oct, 2004
As a general rule, expenses associated with your home are private and you can’t claim a deduction for them. However, in circumstances where you do business-related work at home you may be able to claim deductions for some of the expenses relating to the area you’re using for business purposes. The expenses cover two broad categories:
Occupancy and Running Expenses
Occupancy expenses are related to ownership or rental of the home and are not affected by income earning activities, these expenses would be incurred regardless of whether or not you were carrying on a home-based business. Occupancy expenses include rent, mortgage interest, land and water rates and house insurance premiums.
Running expenses relate to using facilities within the home, for example, electricity, cleaning, depreciation, leasing and repairs relating to furniture, etc in the office. These expenses would be higher than if you were not running a business from home.
What is Required?
Where you have an area set aside exclusively for business activities, it must have the character of a \'place of business\', including being:
clearly identifiable as a place of business (eg a sign at the front of the home);
unsuitable to be used for private purposes in association with the home (eg not suitable for someone to sleep in);
used almost exclusively for carrying on a business; or
regularly visited by clients.
Common examples are:
small business operator\'s main office;
tradesperson or craft person’s home workshop;
a doctor or dentist’s surgery or consulting rooms.
How much can you Claim?
When claiming a deduction you must be careful to claim only for the expenses related to producing income for your business. This means that expenses will often be separated between business and private use. With regard to occupancy expenses, a percentage of expenses (rent, interest, rates, insurance) that relate to the area you use for business.
Commonly a claim is made representing the floor area used for business as a percentage of the total floor area of your home. Utilities expenses must also be apportioned. If this apportionment is not based on floor area you will need to clearly document the basis of calculation.
A telephone used exclusively for business can be claimed (ie rental and calls) but not including installation costs. If this phone is used for business and private use then the business portion is deductible, based on an itemised account. If an itemised account is not available you would need to keep a record for a ‘representative’ four-week period to establish a pattern of use for the whole year.
Travel Expenses
Generally, the cost of travel between your home and work is considered a private expense. The cost of travel for any reason associated with a business is deductible. This means that if your home is your principal place of business you can claim the cost of trips between home and other places as a cost of running your business.
Tax consequences of using your home as your principal place of business?
You generally don’t have to pay capital gains tax (CGT) on any capital gain you make on the sale of your main residence (home). However, where you use your home as a place of business and are entitled to a tax deduction for some of your mortgage interest, or would be entitled to a deduction if you had a mortgage, you do have to pay CGT if you make a capital gain on the sale of your home. The amount of CGT relates to the proportion of your home used for business.
Conversely, if you were not entitled to claim a deduction for mortgage interest, you wouldn’t have to pay CGT if you sold your home.
10th Oct, 2004
Purchasers often ask agents for advice about what sort of offer to make on a property they would like to buy.
Sometimes they simply want to test the water but often it is because market knowledge acquired during conscientious weeks and months disappears in the face of a strong emotional attachment to what they already see as their new “home”.
Purchasers have to work even harder at being objective if they find their dream home after seeing property after property that didn’t suit. Above all, they need to avoid letting their feelings show, as a conscientious agent (working hard on a vendor’s behalf) may advise the vendor to drive a harder bargain if a purchaser appears too keen. The astute purchaser looks for and highlights the property’s faults, both to remind themselves to stay cool and detached and to keep the vendor guessing.
The crucial factor purchasers should take into account before making an offer is the state of the market. In a buyers’ market, buyers have the upper hand and can drive a harder bargain by highlighting faults and playing a waiting game, but in a sellers’ market, using such tactics will cause buyers to lose out to someone who is more market aware.
While some purchasers make the mistake of letting emotion cloud their objectivity, others find that being too hard-headed in the search for a bargain rarely pays off – a ridiculous initial offer on a competitively price property seldom ends up in a sale let alone a bargain. Vendors who are offended by low offers often refuse to make a counter offer and opportunities are lost on both sides.