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With Portfolios - Property... Make it Happen

Recent economic events have caused a heightened level of uncertainty, however…

For more than a year, Portfolios has had an alliance with McGrath Real Estate Agents and their mortgage broking arm Oxygen Home Loans. In conjunction with them we provide services throughout the Newcastle, Hunter Valley and Port Macquarie regions.
We get access to John McGrath and his views on property and we thought that this market review for Winter 2011 will be of interest to you. Let us know your feedback. Happy reading!

Click here to read McGrath Market Review Winter 2011.

Headline: 80% of property investors make the same mistake!
Sub Headline: Are you getting the most from your investment property?
80% of property investors are not properly depreciating their investment property asset – missing out on the potential to make thousands more.
Its a simple problem – often over looked.
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Depreciation on an investment property is effectively free money.
Are you missing out on free money?
Bradley Beer from BMT Tax Depreciation says that “If you own an investment property and have not been claiming depreciation, you will be missing out on thousands of dollars. Even if you are claiming depreciation you may not be maximising your claim. Property depreciation will help an investor to increase their cash flow by reducing the tax they pay.”
Asset depreciation is nothing new to a business owner.  If you earn an income from an asset you can depreciate that asset as an expense, albeit a ‘paper’ expense. Expenses of course are tax deductible.
The difference with property investors is that the Australian Tax Office allows property owners to claim this depreciation as a deduction against their taxable income. Depreciation expenses, along with other ‘paper’ property costs can cause a property to make a loss on paper thus allowing Australian tax payers to claim this loss against their pre-tax income.
Sub Headline: What Is Depreciable?
All aspects of a property and the property’s fixtures and fittings are depreciable as all aspects of the property age. If the building was constructer prior to 1985 you can not claim depreciation on the building, only the fixtures and fittings.
Sub Headline: What About Older Properties?
Purchasing an investment property should always be about the deal and your personal outcome not whether it is depreciable or now. However, you should know that all properties are likely to have aspects that are depreciable.
We recommend you get a proper depreciation schedule on an older property before settlement. After all it is part of your due diligence on the property.
Sub Headline: Are You Renovating – What About The Old Fixtures?
Renovating a property – you may be eligible for scrapping benefits.
Scrapping occurs when the items you are removing from a property, to improve that property, still have both a value and future depreciation benefits in them. You write off the potential depreciation benefit as a deduction against the property income. This also applies to the building.
If you are renovating do not throw away fittings and fixtures without understanding their depreciation potential.
Just more proof that a properly through through strategy and finance deal can get you set up to make the most from your property investment journey. Make it happen with Portfolios.

Are you getting the most from your investment property?

Up to 80% of property investors are not properly depreciating their investment property asset – missing out on the potential to make thousands more.

Its a simple problem – often over looked.

The sub prime market in America caused all sorts of problems for the lending marker world wide, raising the cost of lending for lenders and of course increasing interest rates for the average borrower.
But the low doc market in Australia did not cause the same issues locally as the sub prime market did in the US. Why?
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In short the Australian Reserve Bank knew about the American sub prime market and long prior to banks being able to offer low doc loans was able to put a watch on the market and keep it under control.
“The term ‘Low Doc’ came about because borrowers need fewer documents to apply for a loan. Rather than provide payslips or tax returns, a borrower can simply state what their income is, a process called “self-verification”. Low-doc loans are primarily for self-employed people with limited records of their income.”
One of the controls over the low doc market has been the Australian Taxation Office. Unlike the IRS in America, the ATO has been watching the low doc market for people who understate the income on tax records for tax purposes and then ’self determine’ their income to be higher for the lender. With this stand over tactic the low doc market has not had the same free reign.
Back around 2005-7 when the low doc market was booming the Reserve Bank was more concerned about borrowers who used low-doc loans to overstate their income and get their hands on more money.
“In its biannual Financial Stability Review, early 2005, the Reserve put low-doc lending on its watch list, citing it then as a potential threat to the banking system.” This action perhaps protected many Australian property investors and home owners from the credit crunch that took hold from late 2008.
The rural / regional banks in Australia, perhaps desperate to increase their market share, were the major protagonists of low doc lending. Banks such as the Adelaide Bank was at one stage lending over 30% on low doc with Suncorp around 10% with the majors staying somewhat in single digits.
Today, in Australia, to be able to apply for a low doc loan you must be able to secure 20% of the equity yourself. Banks will no longer lend above this amount on a low doc loan giving the borrower and the lender a healthy buffer against loss. If you look on the Portfolios Property site you will see in each of our property deals we supply both low doc and full doc scenarios with lenders requiring 20% or more equity for low doc.
The lenders also manage the risk by requiring mortgagees to take out lenders insurance. Mortgage insurance protects the lender from default and can cost over $10,000 on an average loan.
The financial difficulty and bankruptcy clauses in the US has allowed them to become a nation of entrpreneurs, but has also made it too easy to default. The ‘get out’ clauses in Australia are much tougher than in the US. While lenders here went on a spending spree in similar proportions to America, the regulatory constraints of getting out of your debt in Australia is much tougher than overseas. In America lenders in many instances were simply walking away from the properties leaving the keys in the door and sometimes within months were back in another mortgage again.
Having a glut of properties worth nothing, with hge mortgages over them, and no one to buy them stung the American, and world financial system hard. This situation hasnt been and is unlikely to be repeated in Australia with tighter controls.
We recommend you review your loan types with Portfolios – low doc loans are still available and in the right conditions can be very profitable.
Contact Portfolios for more information.

The sub prime market in America caused all sorts of problems for the lending marker world wide, raising the cost of lending for lenders and of course increasing interest rates for the average borrower. We examined this in our last article on the sub prime market.

But the low doc market in Australia did not cause the same issues locally as the sub prime market did in the US.

Why?

We are constantly being asked why we put so much of a focus on Queensland when there are great deals around the country in property investment.
Ar Portfolios we scour the entire Australian property investment market, and will be bringing some properties in other areas soon.
In this article we will show you why Queensland show great potential in property investment and why we have chosen to offer such a large proportion of our property selection here.
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Firstly you will you note that all Portfolios Property is measured against our strict property selection criteria. In selecting these properties only properties scoring more than 15 out of 20 even make our short list, with the majority of our offering being 18 or above. See our previous article on property selection.
When we show you Queensland’s benefits, perhaps you might ask yourself – when looking at your potential investment – whether the area you are investing in stacks up.
What About Queensland?
The real Gross Domestic Product growth in Queensland is the highest in the country. When placed on the international stage, GDP in Queensland even out performs global competitors like UK, USA and Japan. This is staggering for one state. Much of this is on the back of the resources sector but there is also heavy expenditure right across the state in infrastructure.
Following on from above, Queensland is home to the largest public infrastructure spending program in Australia’s history. You only have to take a drive through Brisbane to see the massive expenditure taking place, but outside of the metro areas ports, roads and rail are being constantly upgraded to meet the growing market.
Queensland is home to a growing young and entrepreneurial workforce fueled by numerous world-class educational institutions. In step with this is Australia’s fastest growing consumer market, being buoyed by the relatively young affluent population. Not to be outdone many parts of Queensland are experience growth in the retirement market with favourable climate and low cost of living.
In terms of trade and economy, Queensland has the 2nd highest number of international arrivals into Australia behind Sydney. The East Coast now known as Australia’s trade coast – connects Queensland to global markets (through many ports including Gladstone, Cairns) There are over 127,000 businesses and the number is growing daily.
Queensland has been ranked by KPMG as one of the world’s mos cost-competitive locations. With the fastest growing population in Australia – major domestic inward migration – as well as from outside Australia, it is unlikely property prices will stop growing in the near future.
So there you have it – we believe Queensland is a great market for property investors. We encourage you to consider your next investment in Queensland and as always are happy to discuss your unique requirements and investment strategy to help your investment property portfolio grow.

We are constantly being asked why we put so much of a focus on Queensland when there are great deals around the country in property investment.

At Portfolios we scour the entire Australian property investment market, and will be bringing other property opportunities from other states, but it is true, we have seen the most potential to date in Queensland.

In this article we will show you why Queensland show great potential in property investment and why we have chosen to offer such a large proportion of our property selection here.