NOVEMBER PROPERTY UPDATE
Here’s a peak at what’s included in this month’s update.
From Nathan: Trump, What’s the deal for Australian property?
Property Management: Renovating for profit
Accounting: The holiday ‘wait’
Legal: Foreign buyers of NSW property to pay extra stamp duty
Finance: Finance for self managed super funds
NATHAN’S UPDATE: TRUMP, WHAT’S THE DEAL FOR AUSTRALIAN PROPERTY
Like him or hate him, he’s what we’ve got to work with. A lot of people are fearing what might happen, so I want to reach out and talk about what the ramifications could be in the market. In short I believe the world will keep spinning and the sun will continue to rise each day, however, there could be interesting times ahead.
Quantitative easing has been in play for most of the last decade, and US Federal Reserve interest rates are now at 0%. Like so many things, this was something Trump fired off the cuff shots at during his campaign. Now that he has won the Presidency, will Trump change his tune on this as well? From the outside, it looks like Trump will need to expand the deficit to fund his construction plans and build ‘great roads’. However, it will be difficult for Trump to implement some of his policies if interest rates rise. The flow on effects mean that money, will probably remain cheap for a while still.
On the Australian side, Australia could benefit from the increased demand in commodities that a Trump driven US infrastructure boom would bring.
On the international scale, he is a protectionist and wants to reshape America’s trade agreements to favour American business. This could be detrimental to some economies, such as China, which is already straining for find enough consumers for its production output.
This could also put political strain on relationships between the two countries. A lot of foreign interests could be withdrawing their money from the US and diverting it to Australia, as we represent a stable economy with an attractive commodity and resource sector as a backbone.
In short, I am optimistic about the future and I think that Australia is well protected from any potential instability. Property portfolios built on the right foundations should not be negatively affected.
PROPERTY MANAGEMENT UPDATE: RENOVATING FOR PROFIT
Renovating investment properties is not a new concept, it’s something many investors attempt, but few do well. When renovating for financial gain, there are a few things to consider;
WHAT IS YOUR FINANCIAL GOAL?
What is the profit you are looking for? Do you want to increase your rent? Do you want to increase the value of your property? Do you want to gain tax benefits in the future? Is it a balance of the above?
WHAT IS YOUR BUDGET?
Once you know your financial goal, you need to understand your budget. An accountant such as OnePath Accounting can help you crunch the numbers and come to the best dollar figure. They can also advice on things like depreciation and scrapping values of fittings, to help decide how to renovate.
WHO ARE YOU TRYING TO ATTRACT?
There is no point in over-capitalising on the renovation if your goal is to attract a blue collar tenant. The end result should leave the property looking refreshed, tidy, and welcoming. It doesn’t need to have all the bells and whistles.
RENOVATING ON A BIDGET
Once you know your budget you need to make sure it goes the distance. Blink property are experienced at carrying out economical renovations that get results, for a fixed price. Blink Property recently renovated a 3 bedroom house on the Gold Coast for just $17,000. This renovation resulted in a $70,000 increase in property value and an extra $60 a week in rent. It has also opened the door for the owner to purchase another investment property.
Periodic renovations are part of any property management plane. The property managers at Blink Property can review your property and provide their expertise on it’s potential to gain from a renovation.
ACCOUNTING UPDATE: THE HOLIDAY ‘WAIT’
We all look forward to the holiday season for some time away from work, time with loved ones and time doing what we love. There’s a downside which is the associated holiday weight, and the holiday ‘wait’.
Along with overindulging it’s easy to become complacent and say “I’ll wait until after the holidays to do…”. However, when it comes to being more tax smart, more property savvy, more organized or more focused on your goal, there is no better time than right now to start.
Use this holiday period to do the following things for yourself.
DO YOUR TAX RETURN
It’s halfway through the next financial year, you’ve exhausted your excuses! There could be cash you are entitled to. Wouldn’t that be a nice gift to yourself? Additionally, make sure to review your structures.
CONSOLIDATE YOUR SUPER
If you have more than 1 superfund, then it is 1 too many! Put your super in the best performing fund. Review your and your partners’ super balances, could combining these into a self-managed super fund allow you to invest in property? Don’t let your super, your money, whittle away to nothing because of laziness or it’s in the “too hard” basket
ORGANIZE AMD REVIEW YOUR PAPERWORK
Do you know each properties cash flow position before and after tax? This is the perfect time to organize all that paperwork and get it reviewed by an accountant. Book a property cash flow and tax implication meeting with OnePath Accounting to find out if your properties are performing to cash flow and equity expectations.
REVIEW YOUR FINANCE TERMS AND CONDITIONS
Interest is a tax deduction, but that does not mean you should just pay any interest which your bank has applied for you. Negotiate your terms and conditions with your bank, reducing interest rates are one of the easiest cash flow “wins” you can have
DO YOU NEED A TAX VARIATION?
Cash flow can be tight at this time of year. You have more personal expenses (gifts, holidays etc.) and tenants tend to vacate as they relocate with the New Year. A tax variation may assist to smooth out your cash flow constraints.
Don’t succumb to the holiday wait syndrome – be willing to do what other’s aren’t and you will be ahead of the pack.
LEGAL UPDATE: FOREIGN BUYERS OF NSW PROPERTY TO PAY EXTRA STAMP DUTY
The 2016 NSW Budget introduced a 4 per cent surcharge purchaser duty on the purchase of residential real estate by foreign persons.
The surcharge is in addition to the duty payable on the purchase of residential property.
Foreigners will no longer be entitled to the 12 month deferral for the payment of stamp duty for off-the-plan purchases of residential property.
This surcharge will also apply to landholder transactions if there is a landholder liability and one or more of the properties owned by the landholder is classified residential and the purchaser is a foreign person who purchases shares or units in the landholder.
For more information or legal guidance contact a property solicitor such as Zenith Legal.
FINANCE UPDATE: FINANCE FOR SELF-MANAGED SUPER FUND INVESTING
There has been an increase of investors tapping into their super funds as a way to invest in property. Investing through super funds can open up new opportunities but there are some differences, especially on the finance side.
SMALLER CHOICE OF LENDERS
not all lenders have SMF loans available, or necessarily make them available on the open market via brokers.
HIGHER DEPOSITS REQUIRED
Generally most SMF loans require a loan to value ratio (LVR) of no more than 70%, with further restrictions placed on certain postcodes or property types. Some lenders may also require minimum superfund balance of around $150,000 to $200,000 or a minimum fund position (buffer) set aside for the asset being purchased.
Most lenders will ask for a statement showing year worth of super fund contributions. Many people experience delays getting these documents from their super fund, which is why Zinger Finance recommends getting a pre-approval before looking to buy property.
Borrowers should expect to see higher fees associated with SMSF loans than regular loans. Borrowers should budget accordingly, especially if the fees are to be met by the super fund.
Require a statement of advice – Lenders now need to see a written statement of advice from a financial planner, stating that the property purchase is supported by a financial plan.
If you are interested in investing super speak to a finance strategist at Zinger Finance to find out about the next steps.