CFS Blog

Should you trust the management of your investment property to an agent or do it yourself?

Seldom has the property market looked so ripe for investment returns. Soaring rental values, rock bottom interest rates and a shortage of supply have created a prime market for investors.

But locating and buying the perfect rental property is only half of the equation – the next challenge is to find and manage your tenants.

The good news is that landlords have the option of taking the job on themselves or outsourcing to professionals, and there are certainly pros and cons with both.

Professional property management services come at a premium, which can range from around five to 10 per cent of the gross rental. While this will certainly put a dent into your rental income there are some distinct benefits to using an agent.

For starters you won’t be called on day and night to fix leaking taps and broken fences. The agent will take care of managing all maintenance issues associated with the property, which can be a big advantage – especially if you don’t live near to your property.

There’s also the advantage of tapping into a broader network of prospective tenants should your property become vacant; what’s more the agency will help assess and select the best tenants as well as organising the collection of rent.

The main downside of using an agency is the reduction in income, which may mean all the difference between a cash positive or negative investment.

Self-managing your property essentially gives you more control over your investment. You can pick and choose your own tenants, and as long as you’re handy with a hammer you’ll be able to reduce the cost of maintenance by taking care of small jobs yourself.

At the end of the day you need to consider how hands-on you’re prepared to be with your investment before making a call on whether to bring in an agent or not. If the property is out of your local area, and you’re not much of a handyman, it may be best left to an expert.


Disclaimer
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

Money is one of life’s most valuable commodities, so it is important to develop good saving skills from a young age. Try these simple tips to help educate your kids about money.

Almost one third of all personal insolvencies in Australia last financial year occurred among people aged 35 and under. More obviously needs to be done to educate young people about money management and debt, and the best place to start is at home.

Here are a few helpful tips to get your kids thinking about investing in their future:

• Have an allowance scheme:

Rather than buying your children items on demand, give them a small sum (say $10 to $15) each week to manage. This will get them working to a budget (and you won’t always feel like their personal ATM).

• Create a savings account:

Open a savings account for your children with a passbook rather than a card, as this will make it more difficult for them to withdraw money once it has been deposited.

• Talk to their school:
  

Find out from your children’s school whether it has a money education program and see how you can help your child put these initiatives into practice at home. For example, the Commonwealth Bank offers a program called ‘StartSmart’ for primary and secondary school children to educate them on the importance of saving.

• Encourage your child to get an after school job:
  

If your children are at an eligible age, encourage them to get an after school job with minimal working hours. Not only will this give them a sense of freedom and independence, it will also help them to understand how money is earned – which may help change their perception on unnecessary spending. It will also help boost their CV when it comes to securing a full time role.

• Talk about money:

Most importantly, be a sounding board for your children’s questions and concerns regarding money. If they know they can come to you if they experience money problems at an early stage, it will be easier to help guide them back on track.

Disclaimer
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

Whether you’re looking to move quickly to capitalise on property investment opportunities or drive down your home loan, a line of credit can be a powerful tool – but it is not without risk.

How does it work?
A line of credit is an interest-only home loan that can offer borrowers instant access to any repayments made to the principal sum.

Borrowers can choose how much or how little of their loan they repay each month – as long as the monthly interest repayments are met.

Who is it for?
A line of credit is essentially for investors and borrowers who aim for aggressive mortgage reduction.

Investors favour this flexible product because they can quickly redraw money up to the original agreed loan amount without making a new application to the lender.

Used with self-discipline, it is also possible to take years off the life of your loan, but be warned: it can also add years to your repayments if you dip into the loan too regularly.

Borrowers may pay their full salary directly into their loan each month to drive down the principal, using a credit card with an interest free period that is linked to the account to pay for monthly living expenses.

At the end of the month, the required amount can be withdrawn from the loan to pay off the credit card and the cycle begins again. But if you don’t repay more than you would with a principal and interest loan you’ll end up multiplying – not cutting – the amount you end up repaying.

The interest rate on a line of credit is also generally higher than a standard variable rate loan as you’re paying for a lot of features. So make sure that you use the features available, otherwise it’s worth considering a different type of mortgage. Please give us a call to determine whether a line of credit mortgage is right for you.




Disclaimer
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

Raising a 20 per cent deposit can be a challenge but with Lenders Mortgage Insurance (LMI) you may be able to side step this obstacle.

Before LMI was available, lenders would usually lend up to 80 per cent of the value of a property, leaving the buyer to chip in the rest.

When lenders agree to lend you money there is a small risk that they won't get the money back should you default on your repayments. An 80 per cent loan is therefore recognised as the 'safe' risk level by most lenders – should they have to repossess the property.

LMI was introduced some time ago to enable lenders to offer higher percentage loans. The insurance essentially protects the lender for the amount above the 80 per cent level should the borrower default and ultimately end up with their property being repossessed.

Open opportunities with LMI

With the backing of LMI, lenders are willing to lend as much as 95 per cent of the property value as they are protected – and this can make a significant impact on the amount buyers need to put in themselves as a deposit.

As the borrower you pay the premium, but while it may seem like you are paying insurance cover to benefit somebody else, LMI makes owning a home easier and more affordable.

It could also mean getting into your own home or securing, an investment property, years earlier than imaginable if a 20 per cent deposit was the only option.

Imagine how long it could take some would-be buyers to stump up a 20 per cent deposit on the average $600,000 Sydney home? That's a sum of $120,000 on top of all the other expenses associated with buying a house.

By reducing the deposit required, many borrowers are able to purchase a home much earlier, or buy a better property than they would otherwise have been able to afford.

Alternatively for property investors, lenders mortgage insurance allows borrowers to have higher borrowing ratios, giving them the opportunity to maximise negative gearing benefits.

LMI premiums are calculated on the amount that you borrow – and as you'd imagine, the higher percentage loan the higher the premium. But the good news is that the LMI premium can often be capitalised into the overall loan, thereby reducing upfront costs.

It's important to bear in mind that the higher the loan amount you take out, the bigger the repayments. It's essential that you think carefully about what your monthly budget can accommodate to ensure that you don't over stretch yourself.

If you have any questions or would like further details please don’t hesitate to give me a call.

<Disclaimer>

This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services officers, employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd  will take no responsibility for any factors that may change thereafter. All readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

Negative gearing is a popular technique with Australian property investors because of its tax advantages, but it is not without risk.

There’s no doubt negative gearing has been one of property’s biggest buzz words in recent years. And there’s good reason why: with the right approach it can provide great tax advantages and cash flow benefits favoured by many landlords.So what exactly is negative gearing and how does it work? Gearing essentially refers to the act of borrowing to invest. A property becomes negatively geared when the costs of owning it exceed the income it produces – i.e. you are making a loss.

Why would you choose this approach for Negative Gearing?

For investors there is one key reason – to maximise the return on their initial investment, or in other words, minimise the amount of money that they put down on the property from their own pocket.

For a simplified example, an investor buys a $500,000 property, puts down $100,000 (or 20 per cent of the value) of their own money, and takes out a $400,000 interest only loan.

Over a 12 year period let’s say the property doubles in value, so it is now worth $1 million. When the investor sells the property, and repays their $400,000 interest only loan, they will recoup a gross figure of around $600,000.

That represents a gross return of $500,000 on their initial $100,000 investment. But remember that out of this figure there will be selling costs, any rental shortfall over the period and of course capital gains tax.

Nonetheless this opportunity to significantly magnify a small investment by gearing (or borrowing) remains popular as an investment strategy.

There are also associated tax benefits for negatively geared properties as there may be an opportunity for the landlord to offset any loss against their taxable income.

Take care however: negative gearing is a game that requires caution.

Be very wary of developers’ promises about the potential for future returns on an investment, and do as much research as possible to ensure you are making a sound investment.

It is also essential that you seek professional advice on the tax issues associated with negative gearing and never borrow beyond your means. If you have some concerns, or would like some more information, please feel free to get in touch.

Important Points for getting Negative Gearing Right

• Avoid over-inflated markets and choose your investment carefully
• Make sure you have a reliable, strong income flow
• Borrow conservatively to minimise risk

Interested in finding out more about investing in property, then why not make an appointment for a FREE Initial consultation.


Disclaimer
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

If you’ve got cash but it’s all tied up, a deposit bond could be the solution you need to secure that new property.

Whether you already own property, managed funds or collectables you may find that when the perfect opportunity arises, the cash you’d like to put down as a deposit on property is locked away elsewhere.

In the worst case scenario, liquidating assets at short notice may mean making a loss – or at the least not maximising potential returns. In such instances a deposit bond may be the perfect solution to raising a deposit to secure a property.

What is a deposit bond?

Put simply, a deposit bond is an alternative to a cash deposit. It is in fact an insurance policy whereby an insurer guarantees the vendor that it will pay the deposit at settlement without any cash actually changing hands.

Deposit bonds are particularly useful for property investors who may be rich in terms of assets but cash poor.

Deposit bonds can be well suited to long settlement terms or if you’re purchasing property off-the-plan. This can allow you to liquidate other investments once they have matured, or are at their peak rather than when the situation dictates.

Another advantage of a deposit bond is that the associated costs are generally low, especially when compared to other finance solutions such as bridging finance or personal loans, where interest rates can be high.

What to consider in a Deposit Bond.

Like any financial product you need to exercise caution and consideration when using a deposit bond.

While they may sound like a perfect way around your cash problem, they aren’t a guaranteed green light; moreover, some vendors, developers or real estate agents may not accept them.

To avoid any misunderstandings and contract disagreements discuss the use of a deposit bond with the vendor and / or agent to ensure they are willing to accept it before you progress too far into your negotiations.

There is also the unlikely but possible scenario that you default on your deposit bond. While the insurer will only provide the bond if they are reasonably satisfied you can support it, these things do happen.

In this case the insurer will provide the funds to the vendor and then seek the recovery of the deposit from you.

If you’d like more info on deposit bonds please give us a call and we’ll run through your options.

Disclaimer
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

When it comes to selling your property the help of a professional real estate agent is invaluable, but it’s important you choose one carefully.

Selling a home or investment property is a major step. Employing the assistance of an agent can ensure a smoother, quicker, and less stressful process as well as attracting the best sale price.

While there is always the temptation to sell your property privately to save on fees, this can be a false economy in the long run.

A good agent can generally offer a much wider forum through which to promote your property; they also have a network of prospective buyers that can be pointed in your direction.

There is also the added incentive of engaging a veteran negotiator who can maximise your chances of selling for top dollar, therefore offsetting their agency fee.

Of course, the degree to which an estate agent will be able to assist you will vary, so it’s important to select your agent carefully.

Ask around

Check with friends and family about their experiences with local agents. They may be able to recommend an agent they really liked working with or know of one with a good reputation.

Test the water

Approach at least three agents and compare, first of all, how they make you feel. Did you like them? Did you trust them? Are you confident in the way they approached your meeting and how they might interact with prospective buyers? What about their office and receptionist? Listen to your instincts and avoid any agents who make you feel uncomfortable.

Plan of action

A professional agent should be able to produce a formal marketing strategy to show exactly how they are going to market your home. Also ask for a list of recent sales to demonstrate their performance.

The whole package

Although it’s tempting to choose the agent who tells you they’ll get the highest price, don’t be fooled into choosing an agent on price alone. There are agents who will inflate this figure just to secure your listing, leaving you disappointed when they cannot in fact sell your property for that price. The best way to know what your property is worth is to have it valued by a professional, unbiased valuer. This will also put you in a stronger position when liaising with prospective agents.

A fair price

Agents charge a commission anywhere from between one and three per cent of the selling price. While this is a point to consider, don’t let it be the deciding factor.

Disclaimer

This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. 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 author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

Dedicating your tax return to your mortgage can save you thousands

You should have lodged your 2008-09 tax return by now – the cut off was 31 October. While some may be expecting an unwelcome tax bill, for many others a tax rebate might be on its way.

So what exactly should you do with your tax refund?

While it may be tempting to purchase that new lounge suite you’ve been thinking about or splurge on a weekend away, putting your tax return towards your mortgage could save you considerable money in the long term, making it an option well worth considering.

What you could save

We all know that the sooner we reduce a mortgage the less interest we will pay in the long run – but how much exactly could you be looking to save?

Take a tax return of just $1,000 for example. On a 30 year $300,000 home loan at an interest rate of 5.75 per cent, a lump sum payment of $1,000 could save you around $3,000 over the life of the loan while reducing its term by more than two months.

Imagine the results if you did this several times during the life of your loan.

Of course the greater the size of your payment the more dramatic the results. If you had a tax rebate of $10,000 and used it on the above-mentioned loan, you could knock a whole year off your mortgage term and save close to $30,000 in interest.

A long term approach

Don’t forget, this philosophy will work just as well should you increase your regular mortgage repayments – even if it’s by as little as $50 a month.

On the same home loan as above, increasing monthly repayments from the minimum of $1,750 to $1,800 would take one and a half years off your loan term and save you over $17,000 in interest.

So this financial year, dedicate a good portion of your tax return to your mortgage and make extra repayments part of your overall loan strategy – and reap the long term benefits.


<Disclaimer>
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. It is intended to provide general news cand information only. While every care has been taken to ensure the accuracy of the information it contains, neither the author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

Polishing up your house with some simple renovations and TLC can really sharpen its appeal as well as maximise your profit potential – and it needn’t break the bank.

Here are some simple and affordable ways to boost your home’s sale potential so you can maximise your resources for the more exciting project – your new home!

1. Make an entrance – ensure a strong first impression with a welcoming doorway. Think sparkling footpaths and porches and new pot plants. A new front door may also be an inexpensive way to spruce up your entrance, along with a new doormat.
2. A green trim – a well groomed garden is the perfect way to frame your home. Get your lawn in tip top condition, weed the garden, remove any shabby plants and introduce some cheerful flowers.
3. Cleanliness is next to godliness – get out a bucket and brush and scrub away the years of grime from your bricks and windows.
4. Shiny coat – nothing will freshen up your house more than a coat of fresh paint.
5. The small things – new fittings and fixtures can easily modernise an older home. Think door handles, cupboard handles and taps.
6. Repair time – the time to sell is the perfect time to tackle those odd jobs such as broken fly screens, cracked window panes or broken blinds. They may be fiddly tasks but they will give your home a more polished finish.
7. Beautify the bathroom – a dirty looking bathroom can be an instant turn off so take the time to replace any dripping or rusty taps and fixtures. A new toilet seat is also an easy way to spruce up a bathroom as are new fluffy towels.
8. Clean carpets – a steam clean will only cost a few hundred dollars and help restore your carpets to their former glory. Add some sparkle – polish floorboards and shampoo rugs.
9. De-clutter – the easiest and cheapest way to add value to your home is by having a big clean out and removing any junk.

<Disclaimer>
This article does not necessarily reflect the opinion of the author/s, Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. It is intended to provide general news cand information only. While every care has been taken to ensure the accuracy of the information it contains, neither the author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.

If you’re retired and own your own home a reverse mortgage could be the key to unlocking a more comfortable lifestyle.

You’ve put in the hard yards and now own your home yet you don’t have much spare cash to play with. This situation is a reality for many older Australians who did not have the opportunity to benefit from superannuation.

There is always the option of selling the family home to release a lifetime’s hard earned savings but the prospect of retiring to rented accommodation is not one that appeals to most.

A reverse mortgage offers seniors, usually over the age of 60, the ability to release some of the equity that they have built in their home to finance their lifestyle.

There is a range of ways to access the equity, which include drawing down a one-off lump sum for expenses – such as holidays or a renovation – or as a regular income stream to simply improve the day-to-day quality of life.

The amount you’ll be eligible to access will depend on your own personal circumstances but usually home owners can draw anywhere up to 40 per cent of the value of their home.

Unlike a loan no repayments are required as the lender simply takes the amount drawn from the sale price of the home once you sell the property or pass away. You will however be charged interest on the amount you borrow against your home, which will be added to the loan balance.

A word of caution

While a reverse mortgage can greatly improve cash flow and enhance the quality of life for seniors, borrowing against your home requires careful consideration and ongoing diligence to ensure you don’t end up spending away your most important asset.

The rate of interest on a reverse mortgage will usually be higher than a regular home loan and it compounds over the term of the loan, meaning your level of debt can rise quite rapidly. For this reason it is important to draw on the loan carefully and monitor how quickly your debt is rising.

In the very worst case scenario, you may end up in what is called negative equity, where the value of your debt is greater than the value of your home. Many lenders offer guarantees that you’ll never owe more than the value of your home, but not all – so it’s an important point to remember.

Like to know more about reverse mortgages.

<Disclaimer>
This article does not necessarily reflect the opinion of the author/s,  Carruthers Financial Services Pty Ltd or any of its employees or subsidiaries. It is intended to provide general news cand information only. While every care has been taken to ensure the accuracy of the information it contains, neither the author/s, Carruthers Financial Services Pty Ltd,'Carruthers Financial Services Pty Ltd's employees, or its subsidiaries, can be held liable for any inaccuracies, errors or omission. Copyright is reserved throughout. No part of this article can be reproduced or reprinted without the express permission of Carruthers Financial Services Pty Ltd expect for the use for which it was purchased for. All information is current as per the date of delivery and Carruthers Financial Services Pty Ltd will take no responsibility for any factors that may change thereafter. The purchaser of this article and all readers thereafter are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice.