Welcome to the end of the 09/10 Financial Year.

Paying tax is something we all need to do but none of us like to do.

Next tax time you could be adopting legitimate tax minimisation strategies reducing your tax burden whilst building a strong investment property portfolio.

Find out how…

Before reading this article you should always seek proper, independent financial advice before making any investment decision. See the Disclaimer section at the end of our legal page.

With tax time looming we will all be doing our tax returns and probably realising one thing – we are paying too much tax.

Tax is not a bad thing – someone has to pay for our roads, schools and other infrastructure, but there are legitimate ways to reduce your tax by using the money for something more worthwhile like building an investment property portfolio.

We get questions all the time – how can you own a property for under $30 per week? Why so little?

Well one strategy is Negative Gearing.

What Is Negative Gearing?

Negative gearing strategy in Australia is motivated by our tax regime, which allows deduction of ongoing losses against taxed income. This is further offset by taxing capital gains at a lower rate.

This might sound complicated but in reality it isnt.

How It Works!

You purchase a property and incur costs on that property – these costs include third party expenses, loan interest and set up costs.

If the costs on the property are greater than the (rental) income generated you will technically be incurring a loss on that investment.

But the story continues…

You Earn An Income? This Is How It works

In Australia the losses made on property are able to be weighted against your taxable income.

You will need to have a clear picture of your costs versus income to know your losses – costs include depreciation, setup costs, mortgage costs and interest, ongoing maintenance and property costs such as rates. Just like your personal income – you can claim anything that contributes to the generation of income in your property.

All Portfolios properties come to you with a clear understanding of the costs involved so you make an educated decision on the potential for negative gearing of the property before purchasing.

Your capacity to cover the loss is an important factor in determining the right deal.

So If It Is  A Loss Why Do It?

There are a number of reasons why people consider negative gearing as an option for their property investment strategy from straight tax minimisaton through to the great investment returns to be made on the property.

Many of the Portfolios properties are expected to return in excess of 250% return on investment giving you great returns in any market.

Property is a great investment, but like any investment there is risk and you should seek proper independent financial advice.

Talk to Portfolios and see how we can help you make those steps to a future in property investment.

In this second article we give you further insight into making property renovation a great opportunity for you.

The truth is that renovating investment property is an involved and complicated process. But we can help.

In last month’s article we looked at a range of issues including starting out with your end game in mind, understanding the gains you wish to make by having a clear picture of your entry costs, improvements to be made and buffering a contingency.

I remind you that becoming a great project manager is perhaps the best skill you can bring to any reno deal.

Here are some more tips to guide you in successfully renovating an investment property:

1. Be Armed With Knowledge

When you look at a property there is a lot you will need to know about it. Here are some questions you might ask:

• What is the property worth?
• What needs to be done?
• What should be done to capitalise on a profit?
• What is the cost of works?
• Based on your end result get an honest market appraisal on your plans

Due Diligence and knowing all the ins and outs are the key.

2. Know Who Your Selling To – Remember Capital Gain Is The Game

Too often in investment property renovation investors are unclear of the market they are selling to. Make sure when you are deciding on the kind of dwelling you are ending up with that the improvements will suit the local demographic.

For example, if you are renovating a small two bedroom apartment in a dense urban area surrounded by chic cafes and restaurants you are likely to be targeting a young professional or possibly even singles market. Know what this market is looking for and adapt appropriately. Also use colours, textures and furnishings that are appropriate for your market.

This is a good time to remind budding renovators to not get too personal or emotional in your improvements. You are improving to sell not to live in. Keeping it simple also keeps the profit larger.

3. External Factors

What else could possibly hinder the profitability of your development? Use the settlement period to discuss your plans with the local council, if independent assessors are involved perhaps get them onside with your ideas.

Build a relationship with a reliable building team – particularly one you might be able to pay to handle your estimating for you – if you aren’t planning on doing it yourself. Truth is we do very little of our own physical work now purely managing the deal and the project.

At Portfolios we can even show you strategies how to finance the deal using other people’s money and time.

4. Get Loan Pre Approvals

This is your greatest bargaining tool. Both vendors and agents love them and it could help you get a better purchase deal.

Also once you have costed the entire project and built in contingencies, and been approved for the finance then you can get to work immediately and not spend costly months waiting for additional finance.

5. Ask If You Are Unsure

Asking questions can save you from embarrassing mistakes. Ask experts, get information on your potential deal from everywhere possible including competing agents, local council, neighbours, builders, professional property inspectors, valuers, independent property information specialists, and the list could go on.

Financing The Deal

So the deal looks good and you have done your homework – like in any income generating opportunity (or business) you have to spend money to make money.

We have personal experience in renovating property. By talking to Portfolios we can show you how to structure the deal and in turn finance it to maximise your returns, and our friends at Renovating for Profit can show you how to make a lifestyle out of renovating investment property.

First things first fill out a portfolio review or give us a call and we will help you through the steps to making a good life out of investment property renovation.

Make It Happen – you’ll love it.

Paul Pritchett

You can have it all from $7 per week in Kingaroy

July Property Of The Month, Kingaroy, is still offering a great entry into the property investment market with the potential for fantastic returns both in rental and capital gains.

Find out how to purchase an investment property for under $280,000, costing you from $7 per week depending on your financial situation.

Kingaroy is a busy, and popular little town located in the northern Darling Downs positioned as a regional centre with a strong and diverse economy.

The town is located approximately two hours North West of Brisbane and just 90 minutes from the burgeoning Sunshine Coast.

Over the past ten years the region has had an average capital growth in excess of 12%  with forecast growth of 8% being predicted over the next ten. Like all areas of the Darling Downs there is a predicted strong growth over the coming years as new industry moves into the region including coal mining, wind-farming and a 400 MW power station, alone in the immediate proximity.

With rentals fetching $260 per week this property might cost you as little as $7 per week, depending on your tax situation.

Portfolios is offering turn key investment properties in this region including 3 bedrooms, 2 bathrooms, double lock up garage and air conditioning.

You can purchase a property in Kingaroy through Portfolios for as little as $260,000  for a brand new 3 bedroom home on a large block.

To find out why we think this is such a great deal have a look at the properties at www.portfoliosproperty.com.au or follow the link directly to the property.

You’ve watched the lifestyle shows, dreamed of buying the do-upable dump and making a good return out of it.

All over the world people take on projects to renovate and make money from property. It is contagious, both challenging and rewarding.

But what happened to making the dream a reality?

Portfolios is proud to be associated with Cherie Barber and Stephen Tolle and the Renovating For Profit team. It is a unique community of people that buy houses, do them up, and sell them – for a living. The amazing thing about this community is it is made up of ordinary Australians like you and me. There are some who wouldn’t dare put a lick of paint on a wall or pretend to be the carpet layer, tiler, sparky and plumber all in one.

In fact most of these people are simply great project managers, I will come back to that later.

Renovating property is a rewarding experience that, given the right tools, structure, strategy and financial platform, will give you a very fulfilling career or some extra income.

I personally complete 2 -3 projects per year, look after the Portfolios group businesses and along with meeting our wonderful clients that is my plan. Business will give you a lifestyle, your deals will give you your financial wealth.

So how can I help?

When looking into renovation project there are plenty of aspects to consider.

The main 3 are: Structure, Strategy and Finance, other fine print considerations for you could be:

1. What is your exit strategy?

Are you going to renovate and hold or renovate and sell?

Always be prepared when you have to hang onto the property that you have the capacity to hold via income or equity.

2. What is your costs and profit margin?

Understand the kind of gains you can make and manage your improvements accordingly. Knowing your numbers for buy, renovation and end sales price are critical to success.

3. What improvements/ works do you need to make?

Are you just making cosmetic changes or major structrual or even extending the property?

Firstly make sure you can make the changes you want to – check with council and look at similar properties.

Your due diligence is your chosen area will make sure you know what is desired and the end sale price for delivering that to the market.

As you make more an more deals this job will get easier because you will be able to estimate better yourself. But in the mean time surround yourself with professionals. Dont be afraid you will be helping their businesses too.

4. What is your contingency?

I see too many developers, renovators and property investors that come in with a conservative estimate on improvement works and do not consider an contingencies.

Lets face it there are many and varied factors to property projects, allow in your plan to cater for these.

5. Become A Project Manager

Project management 101 – manage your project closely – watch your progress, scope and budgets.

Timing is also critical so use a program to manage day to day activities who is where when – what needs to be completed to allow other works to take place on site. And like your contingency build buffers into your program – rain delays, holidays, slack contractors.

6.  With each deal it gets easier

When I started out – like all of us – I made mistakes but in each case I have learnt far more from them,now I have the privilege of helping people avoid the mistakes I made, saving them valuable time and money.

There are aspects of this business that you will always rely on others to solve for you but increasingly you will be able to take on aspects of the deal yourself based on your growing knowledge – you will become more astute and will see potential everywhere.

Financing The Deal

So the deal looks good and you have done your due diligence, what now.

Make the time to work with the Portfolios Team on your plan, whats possible, the project, structure, strategy and then we can work on finance options.

We can even show you strategies how to finance the deal using other people’s money and time.

First things first complete our Portfolio Review and we will work with you through the steps to becoming that Professional Property person.

Make It Happen – you’ll love it.

Paul Pritchett

Despite Mortgage Downturn

Property investors are continuing to grow in numbers despite an overall decline in the number of mortgages across Australia on the back of successive interest rate rises.

We look at why this is the case…

Portfolios is part of Australia’s largest independent brokerage network Australian Finance Group (AFG). Throughout March, April, and likely to continue in May, AFG confirms the emergence of a two tier mortgage market, with the proportion of investors surging as sales to owner occupiers decline.

Property investors accounted for 36.9% of all mortgages arranged in April, the highest such figure AFG has ever recorded.  This compares with 10.2% for first home buyers and 16.3% for up-graders.

The remaining mortgages in April, 36.6%, were for refinancing purposes.

Why The Confidence in the Investment Property Market?

In our opinion there are a number of reasons to be confident in the Australian property market, we offer some below and welcome your comments:

• The volatility in the share markets always serves as a reminder of the stability and strength offered through a property portfolio
• When company profits fall dividends stop – amongst all of this property investors continue to take in rental income and experience changes on an anualised basis not day by day
• Property investors – buy and hold particularly – are long term investors – minor fluctuations in the market, and they tend to be minor in Australia, do not pose a threat to long term investors
• The Australian population continues to grow at rates outstripping the supply of housing
• Australian lenders continue to operate on the conservative side of the market meaning there is confidence in the capacity for Australians to repay their debt – unlike the scenarios witnessed in the American sub-prime market collapse. See the comment by Paul Braddick below.
• Rents are continuing to climb across most markets regional and metropolitan meaning investors can get in and hang on for longer.

Property Investors Still Making Money

Property investors are continuing to see potential in the Australian property market, particularly in key market areas such as rural mining communities, growth cities such as SE Qld and Brisbane. Major growth centres, or smaller towns receiving substantial financial and infrastructure investment are good bets.

This is not so obvious as in the resource rich state of Queensland where property prices in the mining communities are still reasonable and rentals are beginning to climb even on the back of the existing investment.

Confidence Amongst Bankers

Paul Braddick, Head of Property and Financial System Research, is upbeat about the state of the housing market and is cautious when discussing the need for deleveraging of debt in the market place.

Braddick says “Economy wide debt to income ratios, gearing ratios and even debt service ratios tell us little about the underlying sustainability of household debt. The distribution of debt across the household sector, lending criteria applied and the strength of the labour markets are far more telling for debt sustainability.”

“Relative to offshore  experience, lending into the Australian household sector has remained very conservative.  This is reflected in the virtual absence of a sub-prime mortgage market and extremely low delinquency and default rates.”

Braddick’s sentiments are echoed across the banking sector.

What Next?

Braddick sums it up well:

“In the near term, Australia’s growth prospects are bright and much will depend on the RBA and government’s ability to effectively manage the expansion. Higher household debt means the RBA has considerable leverage over the household sector and their actions during the GFC should instill confidence that the present upswing in growth will be handled well”

Source AFG Mortgage Index April 2010.

Source ANZ Australian Housing Update April 21 2010

A Never to be repeated bargain! Contract has crashed, and YOU are the winner!!

One Only House/Land package in town of Chinchilla for just $375K with Ducted Aircon.

Call Keiran at Portfolios Property for details on 0447 255550

$1000 *refundable EOI, will secure this for you TODAY! This wont last!!

Find out more about this deal…

At Portfolios we have profiled Chinchilla a number of times previously in this broadcast and have profiled it on our property website.

We believe that Chinchilla is a fantastic investment property opportunity and having only a one property left at this fantastic price it will be a shame to miss out.

Chinchilla is located in the Darling Downs 250 Km NW of Brisbane. It is a popular tree change destination. With an historical capital growth of 14% and rental yield 6.6% with vacancy under 1.0 the stats really hold up for this property. If you earn in the 40% tax bracket – this property could be yours from just $43 per week.

Strong population growth continues throughout the region alongside ever increasing job opportunities and tightening rental availability has driven up rents sharply.

The town has a great community spirit and has hospitals, schools and many ammenities of normally much larger towns.

Over $10 Billion dollars is currently being spent on Coal mines, Gas pipe line, Rail line linking rural Qld, gas exploration & waste water purification.

You can find out more about Chinchilla here but we suggest you dont delay to get this great price.

What if you could own your own investment property from just $32 per week? *

You could be realising return on invesmtent in excess of 700%.

Portfolios investment property of the month is Chinchilla.

Chinchilla, located in the Surat Basin Region is undergoing a massive build up of workers and their families, with a strong capital growth over the last 3 years and with the newly signed LNG deal with China this is a place to buy.

Chinchilla is located about 200km west of Brisbane with ever increasing job opportunities. Tightening rental availability has driven up rents sharply and will continue to do so.

The region has hospitals, schools and many amenities of normally much larger towns. Over $10 Billion being spent on Coal mines, a gas pipe line, rail links, gas exploration and waste water purification projects.

The government is also investing in rail in the Darling Downs, linking this region and its rich, diverse production with export ports such Gladstone.

According to investment sources the region around Chinchilla enjoys a 98% employment rate and a rental vacancy rate around 1%.

If you earn over $80,000 per anum we’d love to talk to you about this deal. We have turn key, brand new, four bedroom homes ready to be tenanted today.

If you earn under $80,000 then you might find this deal to be worth while with low property price entry, expected capital gains and expected rental hikes in the coming 12-24 months.

Chinchilla presents a great opportunity. You can view this and other properties in this region at www.portfoliosproperty.com.au or just go to Featured Properties.

With the average loan for an investment property being refinanced every three years it is little wonder the banks have introduced fees to make you think twice about moving away from them.

Loan exit fees have become common place in the mortgage market. Today very few banks provide loans without them. But it hasn’t always been the case.

Lenders exit fees serve to discourage people from refinancing to other banks – or even with the same bank. They are designed to keep customers as long as the bank can.

The challenge for banks is that most home loans do not make as much profitability in the first few years as they do in the ensuing years. Banks need to recoup profit if the customer chooses to exit early.

Fees can range from $400, an average of major lenders around the $750-$1000 mark with non-bank lenders charging a percentage to exit of around up to 2.5%.

Whilst we dont necessarily agree with these exit fees it is something we have work with developing your strategy.

What you need to understand is your strategy affects the loan options and it is far more than just the interest rate.

At Portfolios we understand all consideration of your deal and the associated loan/s which is why we aim to offer up to three loan options into your strategy each with its own profile and considerations. Make sure you take the time to review and discuss.

For example if you are purchasing to renovate and sell  quickly  then we will offer up to 3 loans that typically would have  lower exit fees for great profitability in your deal.

However if your strategy is to buy and hold the property then the early exit fees are not so much of a consideration.

Portfolios will work with you to develop the right strategy that includes Structure, Strategy, the Property and Finance.

If you wish to look at your options and get started complete our FREE Portfolio Review and we will be in contact with you shortly.

Portfolios looks forward to working with you to …Make it Happen.

With all the talk once again of flattening markets in Australian cities astute property investors are looking to regional Australia, Queensland in particular, and with good reason.

There are plenty of opportunities to be found in regional Australia particularly in the resource rich state of Queensland where the mining boom is being re-born in towns where property values are still affordable.

I seriously think we might be staring at another Karratha in the Darling Downs and around service ports like Gladstone. Karratha is a mining town in northern WA wher the property market soared almost overnight due to the intense mining boom of the last decade. Average properties became million dollar hotspots and rents went from average to exorbitant in a short space of time.

The best part of the Darling Downs and Surat Basin area is that property prices are still reasonable and the large projects for the region are starting .It is a case of strike while the iron is hot and this one is hot.

The government and private sector have committed to investing over $10bn in infrastructure which will on its own create significant demand for housing and rental accommodation.

We mentioned in the last newsletter that the largest company to company deal Australia has ever seen has been signed between a Chinese resource company and an British mining company based in Queensland that will see Liquid Natural Gas exported from the Surat Basin to China over the next 20 years.

Putting the Darling Downs aside there’s Gladstone, and surrounding local region, already a strong infrastructure hub set to receive billions of dollars of investment on top of that invested in the last few years in new industry, mining and infrastructure.

Coming back to something more predictable are the growth spots in SE Brisbane. Brisbane and the Gold Coast is the fastest growing population centre in Australia. Areas such as Coomera north west on the Gold Coast Hinterland is a great investment.

Portfolios has investment properties available in all these areas, ask us about places like Chinchilla, Dalby, Kingaroy or Gladstone, Calliope or Coomera. Properties like these ones present a great investment opportunity to enhance any portfolio. We already have clients snapping up these properties sometimes multiples of them.

You can see some of these properties in our Featured Properties section or ask us about other opportunities for you.

The team look forward to working with you to… Make it Happen

Calling all astute property investors…

Get set for great predicted returns, high rental yields on the back of a regional resources boom.

The largest Australian company to company deal ever has been signed between a UK owned Queensland based company and a Chinese resources company that will see over 3.6 million tonnes of LNG exported to China from the Surat Basin.

Chinchilla – The Next Property Boom Town?

Chinchilla, small town turned property hotspot, lies in the middle of the Surat Basin approximately 4 hours drive north west of Brisbane. Chinchilla has always been a location we have been watching keenly as the prices are still relatively low whilst the rents seem set to climb considerably.

Chinchilla, in my view is a good bet not just because of the low prices and higher than average rents. The future of the area is bright thanks to this deal and the rich diversity of industry the area enjoys.

I understand that over $10bn (AUD) is being spent in the region on coal mining, a gas pipeline, rail linking rural Queensland, further gas exploration and waste water purification.

Has The Horse Bolted?

In short no! – but surely it cant last long.

In areas where this kind of boom has occurred in the past property prices have sky rocketed and the rental market has soared. To date Chinchilla remains highly affordable even on current rentals with the best expected to come.

Low House Prices – High Rentals – Great Capital Growth Potential

Portfolios Property has properties for sale in the Chinchilla area for around $350,000 already yielding rentals of $460 per week.

And dont get me started on the potential capital growth in the region which is already running over 14% on a ten year average.

You can get involved by contacting www.portfolios.net.au to see if this opportunity suits you. We also recommend you fill out a portfolio review so we can be prepared.

Make sure you visit www.portfoliosproperty.com.au for details on Chinchilla and other opportunities like it.