This Property Pays You – Roma Qld Property of the Month

We’ve scoured the Australian investment property market and found it, an investment property that will pay you from day one.

Roma in South Western Queensland is a small town offering big opportunities with high rental yield and good capital growth potential.

Now with a positively geared property to add to your portfolio you could build on your strategy to pay off your mortgage sooner. Roma offers the benefits of long term growth and high rental yields. A well connected town, the urban centre is also a regional hub boasting schools, retail and other essential community services. Roma also has a relatively low unemployment rate of around 3% with property occupancy rates below 1%

About Roma

With a population around 7,000 people, Roma is also located in the Suarat Basin in the western Darling Downs area of Queensland approximately 480kms WNW from Brisbane. It is situated at the junction of the Warrego and Carnarvon highways and is the centre of a rich pastoral and wheat-growing district.

The local agriculture industry is worth approximately $620 million annually, 64.3% being generated from crops. 58.7% of businesses in the Maranoa are in the agriculture, forestry and fishing sector, which employs 32.7% of the region’s workforce.

A Changing Industry Mix

But the industry mix is changing.  The “mining boom” is creating towns that are producing exceptional rent and capital growth. The Queensland Resource Council estimates more than 18,000 new jobs will be created in coal seam, gas and LNG industries and another 23,000 in the minerals sector.

Since 1906 natural gas from the local area was used for lighting in Roma. The industry is now expanding exponentially, particularly with coal seam gas.

Origin Energy’s Spring Gully Coal Seam Gas Development is located about 80 km north of Roma and its projects include an 87 km gas pipeline to Roma’s neighbour town of Wallumbilla, Queensland to connect with the 434 km Roma-to-Brisbane gas pipeline hub there.

The Proposed Spring Gully Power Station is an $870 Million, 1000MW power station will provide electricity to South-East Queensland.

Great Potential

If you prefer positively geared property to balance out your portfolio, contact us quickly as there are a limited number of these properties available. In the fields below leave your name and phone number – this will be sent to our private server and we will be in contact.

Add Roma to your portfolio today.

Ready Now Or Ready Later? What’s Your Preference?

This month we take a brief look at investment properties purchased off the plan and those that are turn-key.

Which is better? We take a look at the pros and cons of both.

With an off the plan investment property the purchaser is literally buying an apartment “off the plan” based on perhaps a completed prototype or even on the developers history in the development game. Usually the developer is required to sell a certain number of properties prior to the development commencing construction.

On the other hand a turn-key property is as the name implies,  a completed new property that is ready to “turn the key” and move in.

Off The Plan

So lets look at the pros and cons of off the plan first.

Pros:

• You secure a property at today’s prices with minimal initial cash in (sometimes as low as $1000) and dont have to worry about mortgage repayments for some time – or any other cost for that matter – BUT – you also dont have income from a tenant
• Depending on lead time (some as long as 18 months) you could experience substantial capital growth and sell for a profit at time of completion
• You can sometimes determine basic inclusions and colours – usually from a set range so you may have the opportunity to connect with the market better than your developer
• You are gurranteed the property will be brand new and fresh.

Cons:

• There is a risk that a decline in the property market could spell trouble for values and a drop in your LVR. You may not be able to finance the full loan at settlement.
• If property values have plateaued or fallen, the rental yeild of the property may also have fallen
• The developer is only as good as their last project – you need to be sure that the quality of construction and fitout will be in keeping with the price you are paying and the market your development will be aimed at. There have been reports of developers changing fit out at the last moment to cut costs.
• Buying off the plan can be difficult for someone who does not visualise well – being clear on what you are getting, sense of space and functionality will be important.
• You could start paying your mortgage long before a tenant moves in – sometimes the builders work on a progressive scale of work completion – particularly if you are building a house for investment. You could be paying your mortgage months before a tenant moves in, particularly if a hefty deposit is required.

Turn Key

Turn key properties are ready to be tenanted immediately. You will notice that properties listed by Portfolios Property are always turnkey, we want people to being their investment journey today.

Pros:

• You can start your investment cycle almost immediately. Once you have settled you can start earning money from tenants. To get the first tenants in we advise you to work with local agents during the exchange phase to ensure a tenant is ready when the mortgage repayments start.
• Turn key properties in many states attract stamp duty concessions – you need to check in your local state – stamp duty concessions can wipe thousands off the purchase costs.
• You can see what you are getting in terms of investment – you can go through the normal process of getting a building inspections and of course take advantage of the maintenance period of the new property from the builder.

There are not a lot of cons with the turn key option – specifically related to turn key – at the end of the day you get to choose the property that best suits your situation and market and with the assistance of Portfolios can even look at how the investment plays out over the coming years.

We look forward to being able to work with you to make property investment happen.

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.

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

Here’s a question for you?

Do you know who will look after your assets if the unthinkable happens to you?

A large percentage of property investors are under insured personally meaning that if they were unable to continue servicing the loans due to death or disablement  they would leave a considerable debt – sometimes un-servicable for their family to pick up.

Peter Bentley, trusted advisor with Portfolios says;

“Protecting yourself and your family is a vital part of a successful property investment strategy. If you were to suffer in an accident or be unable to repay your investment loans through disability or death would your family be able to support your portfolio?”

So what kind of legacy will you leave?

Protecting yourself is one of the greatest gifts you can give to your loved ones if you should be unable to support them.

If you feel you are under insured and want some advice go to the website and through our insurance providers check out one or all of the following insurance products:

• Life Insurance
• Accident Insurance
• Income Protection Insurance
• Temporary Or Permanent Disability

Dont leave a nightmare for your family – manage the risk for them and for yourself.

Multiple investment property finance strategies can be complex and require that extra understanding. It takes finesse, especially in the current lending climate.

Direct experience and a long term track record of financing multiple property portfolios and strategies is what sets Portfolios apart in the Australian Property Investment finance market.Delivering To New Clients

Portfolios has had many clients coming from our peers because of our proven track record of delivery. Our clients are telling us about their finance experience like waiting 5 months for a refinance, little or total lack of communication from their broker, and mostly a general lack of experience in delivering complex strategies. These issues are common place issues. Further, the brokers seemed to blame the lenders for the outcome… which begs the question ‘was it presented to the lender/s correctly in the first place’?

A Case In Point

We have a case in point where we documented a strategy for a client to grow from 5 -7 proprties. At the time they may not have seen our value and gave it to their existing broker, all they had to do was follow the document.

Last week they contacted us for help as after 4.5 months its was not delivered. The implementation was totally incorrect and only 1 of the 4 refinance loans were settled. To add to the insult the loan splits were incorrect and none of the 2 new purchases were even at pre approval, all to the extreme frustration of our new client.

The property investment game is not easy. Having access to the mind and experience of the figure head is paramount.

Being The Best – Not The Biggest

At Portfolios our aim is to be the best not the biggest, with an experienced tight knit team that pride in delivering on what we profess. The summary below is our view on how we view you, your portfolio and your strategy

1. Never cross collaterise your loans, we untangle them.
2. Maximise available funds within calculated reason
3. No fixed interest rates
4. Documenting the fine print for loans – in, ongoing and out.
5. Interest only loans
6. A clear written strategy to follow, decided upfront
7. Transactional line of credit and then basic term loans for the rest
8. Clear on the numbers and the costs for refinancing and include all costs
9. Maximising valuations, lender service calculations and current policy
10. The strategy we offer has been extensively researched, and reviewed by the lender credit manager to ensure it will ‘fly’.
11. The strategy needs to allow for YOU. Not just the loans, see previous Blog ‘How are you placed’.
12. No inflated current industry timeframes for loans. We currently allow 6 weeks for a refinance from submission to when funds are cleared in your bank account. The same for a purchase, any time stated under this … well not consistently achievable

The market is heating up and we have seen loads of activity from our existing and now new clients. Being armed with a sound strategy and loan preapprovals in place are giving them the edge with their purchase negotiations

How is you finance team going ?

Are they delivering what they profess, confirmed and documented upfront and in reasonable timeframes?

We welcome the opportunity of working with you and your property investment to make it happen.

How Are You Placed?

For me the game of property investment comes down to Sound Structure ,Strategy, Finance, Your Team and of course You.

A really key consideration first and foremost is available funds. Your funds need to be what we call Strategic Equity Usage and allocated upfront to ensure your whole plan and other factors are catered for.On the point of available funds, you should be aware that as the RBA and lenders increase rates the amount of money they will lend you on your current income reduces, in some cases dramatically.

Allocations should consider loan equity, purchase costs, updated portfolio shortfalls, renovation costs, deal hold costs, living expenses and then importantly the buffers.

The most important addition to any property investment strategy is what I call ‘3 lines of defence‘.

The first is the way we calculate the portfolio shortfall numbers, nett rent and interest rate increase allowances.

The second we make allowances as if all equity has been used, leaving you paying maximum interest.

Thirdly, and important personally, is what we call sleep@night, where YOU allocate 2 amounts that ensures emotionally you are sound.

The two parts of the sleep@night allowance includes:

• How long you need to have the portfolio self sustain, and
• How much extra over you need for that rainy day and/or personal use.

Once all factors are considered and the real numbers allowed, you have a great foundation and plan for you to deliver from.

Any quality strategy needs to allow for personal factors, and there can be many, unique to each person. Looking at your current team how’s your relationship with them going? Have they allowed for YOU?

If you had ever thought of working through your property investment plan, now is the best time.

As money access tightens having the maximum amount of funds allocated to deliver your plan gives you the edge.

At Portfolios we are property people not just providers of finance, we understand all the ins and outs of property investment, complex deals and hold strategies.

How are you placed , do you need a hand to get it all together to make it happen?

Paul Pritchett – Founder Portfolios

In 2010 we welcome to Portfolios Property.

We have developed a property division in response to an overwhelming request from both our clients and property developers wanting to reach an astute property investment clientele such as the Portfolios community.

Portfolios Property will bring you up to ten premium investment opportunities at any one time.

In selecting properties to offer to our community we use a team of people to put each opportunity through a rigorous validation process before offering them on our website.

In the near future we will be launching an exclusive Portfolios Property website at www.portfoliospropert