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As summer fades into Autumn, so too
does the threat of further rate rises. As interest rates
start to look more stable we turn our attention to the
opportunities for investors to capitalise on the current
rental property market. We consider the merits of capital
gains versus cashflow as well as some smart tactics landlords
can employ to make sure they find and keep good tenants
- a must read if you're interested in property investment.
And if you're keen to see a few more dollars in your bank
balance at the end of the month, our tips on saving should
also be an inspiration. I hope you enjoy this edition
of our newsletter and if there's anything you'd like to
discuss please don't hesitate to call.
Sincerely,
Capital West.
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Smart savers
Almost everyone can afford to take ten per cent of their
weekly earnings to put aside in a savings account... |
According to ANZ's December Economic
Outlook, Australian household spending has been accelerating
steadily thanks in a large part to an increase in the
average disposable income. The retailers are profiting
from our increased wealth, but are you?
With fluctuating petrol prices, high housing costs and
uncertainty over interest rates, 'budget' is probably
a familiar word in most Australian households. But instead
of budgeting ? just the word gives many of us the shudders
? why not try some of these smarter spending strategies
to help you reach your financial goals sooner?
Know where your money goes: Everyone should have
a plan outlining their financial commitments and detailing
their long-term goals. Knowing where your money is committed
month on month is an important step to saving in the long
run.
The 10% rule: Almost everyone can
afford to take ten per cent of their weekly earnings to
put aside in a savings account; by taking the money out
directly you won't even notice that it's gone. This is
a much better saving practice than keeping an excess amount
readily available, as it removes the temptation to buy
non-essential treats just because you have the cash at
hand.
Weekly allowance: Give yourself
a weekly allowance making sure you have enough to purchase
all your grocery needs, with a little extra for incidental
spending and other expenses. Keep this money in a separate
account to your savings.
Keep debt in check:
Avoiding additional debt from credit cards is essential
as these can attract huge interest rates. Use the savings
taken from your salary instead to make large purchases;
another option to consider is to take out a personal loan,
which typically charges interest at a lower rate.
Increase your mortgage repayments: Try upping
the contributions you make to your mortgage each month.
The more cash you put towards your home, the faster you'll
be able to unlock equity to use for other projects or
investments.
Being cash conscious doesn't mean you have to feel like
you're on a strict budget. But removing the excess from
your account and planning how you spend your cash can
make a big difference to your financial future.
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Capital West Mortgage Group
P/L
ACN: 125 798 852
ABN: 76 125 798 852 |
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| Tel: |
| 1300 765 234 |
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| Fax: |
| (03) 8621 0080 |
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| Email: |
| info@capitalwest.com.au |
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| Web: |
| www.capitalwest.com.au |
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| Postal Address: |
Suite 604 / 103 Oxford St.
Collingwood
VIC 3066 |
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Capital growth
vs rental return: which investment property is suitable
for you?
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Investing in real estate is undoubtedly one of the most
efficient ways for Australians to build their wealth.
Property has historically increased in value in most markets
in the long-term and gives buyers the added benefit of
receiving a direct return from the rental income.
Property that yields high rental returns as well as good
capital growth can be hard to find. So many investors
therefore usually base their strategy around either long-term
capital growth or a cash-positive rental return.
If you're not sure which path you should take, the following
tips should help you decide which strategy best suits
your goals.
High rental returns
Though they can pop up anywhere, good rental yields typically
arise in regional or outer suburban areas. While such
properties are less likely to be affected by fluctuations
in market prices, steady rental demands increase the likelihood
of solid rental returns.
Properties with a high rental yield can make for a great
investment with those looking to increase their day-to-day
cash flow, however it pays to take note that it is also
taxed as income, and this can minimise an owner's net
earnings.
Capital Growth
Capital growth investors on the other hand are looking
for properties that appreciate in value rather than focusing
on the rental yield. While usually found anywhere, investors
often focus on capital cities or areas of growth and development.
The objective of this strategy is to sell the property
for a profit within a certain number of years, leaving
a healthy return on the initial investment.
It can be a struggle for some investors to work through
the first two years of ownership though, as the rental
returns may yield little or no profit and mortgage repayments
may need to be bolstered with other funds. Just be careful
that you're not over committing or paying more than you
can afford.
It
is important to remember that while property investment
is one of the safer options open to Australians, there
is no guarantee that a property will
continue to increase
in value at the rate it has done in the past. Make sure
you take time to research the market, always take a
long-term view and speak to your broker to ensure you've
chosen suitable finance.
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| Mortgage
health check |
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With 2007 well and truly underway, now is a good time
to investigate how well your mortgage is performing. Any
number of alterations to your work habits or lifestyle
spending may have affected your financial needs, so it
pays to have a quick look at where your money is going,
what interest rates are up to, and whether or not you
are getting the maximum use out of your loan features.
To find out if your mortgage is working hard enough book
an
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appointment with your broker. In the space of half an
hour they can outline whether your loan is up to the task
or whether a new loan may better suit your current circumstances.
It might also prove a good time for you to consider locking
part of your loan into a fixed-rate combination. Asking
a few simple questions could save you plenty of dollars
in the long run, so make an appointment with your broker
today!
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Proactive landlords profit more
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As the owner of an investment property it can be a little
disconcerting knowing that the potential value of your
property can come down to the way it's treated by your
tenants.
If you want to protect your investment, getting the right
tenants is an obvious place to start. But the following
proactive actions could safeguard your property's long-term
rental returns without costing big dollars.
Choose
a representative: Having a professional liaise between
you and your tenants is an effective approach with an
investment property. Choose an agent who's enthusiastic
about keeping a good relationship with your tenants, and
proactive in your property's care and maintenance.
Know your rights and responsibilities: Although
your agent can guide and instruct you, it's essentially
your duty to know what your rights and obligations are
to your tenants ? so read up on state guidelines to
make sure you aren't caught unawares.
Get
insured: Many property owners in Australia are significantly
under insured when it comes to their home and contents.
You need to make sure that your investment has the right
cover to protect you and your tenants and to safeguard
against any scenario, such as fire, flood or burglary.
Put everything in writing: Transparency is
the best way to avoid complications in a contract situation.
Keep a copy of all contracts signed by your tenants as
well as documenting any requests, reports or requirements
noted by your agent ? a paper trail can be a great incentive
for your tenants to keep the property in good repair.
It's also a good idea to increase rent costs annually
by a sensible margin, and this should be outlined in your
initial contract. If your tenants expect a rise in costs
each year there's less chance of complications when the
time comes to ask for it.
Neat, safe and clean:
If you don't look after your property, your tenants won't
see a need to either. Providing a clean and secure residence
will encourage your renters to maintain the property's
aesthetic looks and therefore its value.
Spending a little to make sure that you have the right
locks, smoke detectors and security screens can save you
a lot in the long run. You could also consider hiring
a gardener to keep the outside tidy, and you should always
make sure that repairs are made straight away to avoid
excess damage and unhappy tenants.
Respect
privacy: It might be your investment property, but
while your tenants are living there it is their home.
Your agent should conduct regular inspections, but give
plenty of notice before they arrive.
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| Beating
the mid-afternoon slump |
| Struggling to make it
through the last couple of hours of the afternoon? Try these
five tips to get you through the entire day with loads of energy
to spare! |
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1
Drink plenty of water. Even if you aren't being physically
active your brain needs liquid to work too! Try and keep a
bottle of water handy at all times and take a drink every
twenty minutes or so. |
2
If you're going to be sitting at your desk all day, a huge
lunch will only make you feel tired and lethargic. Aim to
have smaller meals that are spread evenly throughout the day
so you aren't affected by a sharp drop in your blood sugar
level. |
3 As
tempting as it can be to head to the nearest vending machine
for an afternoon sugar fi x, don't! Instead have an apple,
dried fruit or yoghurt to give you long lasting energy.
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4 Increasing
your complex B vitamin intake through a vitamin supplement
can really make a difference to your daily energy levels.
So ask your chemist what would be best for you.
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5
If you're really struggling, then its time to get some fresh
air. Take a walk outside for fi ve minutes, and do some deep
breathing to clear your head. Why not volunteer to take the
afternoon mail if you need an excuse to escape the office!
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Economic
round-up
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With interest rates on hold for a fourth straight month
does this suggest we're near the top of the current rate
cycle?
Homeowners have been spared higher mortgage repayments
as cooling inflation in the last quarter of 2006 prompted
the Reserve Bank of Australia (RBA) to keep rates unaltered
for the second time this year.
An annual inflation rate of 3.3 per cent at the end of
2006 was down from 3.9 per cent in the previous quarter,
but still sits above the RBA target of two to three per
cent.
While home owners can rest easy for another month, there
is no clear indication what the RBA will decide for April,
or where rates will head over the course of 2007.
The RBA raised interest rates three times in seven months
to a six year high of 6.25 per cent during 2006. So, can
we expect another in 2007? The jury is out.
According to a survey conducted by Bloomberg News Feb
13, seventeen of twenty-six economists expect interest
rates won't change this year; two predict an increase
rate rise and seven forecast a cut.
Three rate rises between May and November last year prompted
many homeowners to seek the safety of fixed-rate loans,
with one in five borrowers opting for a fixed-rate in
November.
But with rates looking like they could be near or at the
top of the current cycle, variable-rate loans could now
prove a more attractive option for some borrowers. To
explore whether a variable or fixed-rate loan is suitable
for you, give your broker a call to discuss your options.
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Disclaimer. This newsletter does not necessarily reflect the opinion
of the publisher. It is intended to provide general news and information
only.
While every care has been taken to ensure the accuracy of the information
it contains, neither the publishers, authors nor their employees,
can be held liable for any inaccuracies, errors or omission. Copyright
is reserved throughout. No part of this publication can be reproduced
or
reprinted without the express permission of the publisher. Readers
are advised to contact their financial adviser, broker or accountant
before
making any investment decisions and should not rely on this newsletter
as a substitute for professional advice.
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