Wednesday, May 28, 2014

Investors, is this the time for a portfolio upgrade?

Strong auction activity is the topic of conversation across the real estate world in Australia this week, but what does this tell clients like mine who are property investors?... It's a tangible sign that the real estate market is continuing to perform. Headlines such as 'Massive week for auctions throughout the country' appeared all week on news channels and social media.

According to the latest RP Data figures there were 3,111 auctions scheduled across the nation last week, with over 1,000 auctions being held in both Sydney and Melbourne, an increase of 53% on last year. With a combined national clearance rate of 66.6%, this is a staggering result! At Toop&Toop we've had a massive run of auction sales with 100% clearance for two weeks running and four out of six sold prior to auction last week.

Adelaide has had back to back weeks of high auction numbers, with 121 last week and 119 this week. This is almost twice as many as those in Canberra (72) and Perth (69), which shows South Australia continues to be a serious player in the auction market.

My focus in the market, as head of Property Management, is with investors and considering different investment opportunities is continually front of mind.

So... How can investors make the most of this?

The current auction activity combined with the market surge at the bottom-end creates a great opportunity for investors looking to upgrade their property portfolio. With the right approach, you can turn property over quickly and get rid of your run down stock at a premium, and replace with a fresh build. This can all be done without experiencing an extended period of reduced property numbers in your portfolio.

There are many benefits of upgrading. We see clients faced with continual expenses to maintain older properties, as well as properties that are unsuitable to be rented out. These properties can be a money pit, have an extended period of downtime between tenancies and achieve a low weekly rent in the market. 

For those with a long-term investment strategy these properties can be cashed in and turned over for more profitable and stress free returns, even after factoring in stamp duty and legal fees!

So who will buy them? There is an emerging market for 'home renovators' no doubt (and in no small way) stimulated by reality TV shows such as The Block and House Rules... and these buyers are currently paying a premium for run down properties. 

The 'renovator' home often attracts emotional purchasers and these properties are currently achieving great results, particularly at auction. Whether these buyers are looking to add value through renovating themselves, or simply wanting a blank canvas to work with, investors can make the most of this and clean up their portfolio.

This period in the real estate cycle provides the opportunity to reduce your exposure to costly maintenance, receive additional depreciation on a newer build and remove the rental downtime required for repairs or renovation projects that might be looming. In turn, you will attract better quality tenants who are looking for key features, such as new bathrooms or kitchens. 

The market is embracing auctions. Take this opportunity to run a high-intensity auction campaign to move lower end stock and look to purchase more tenant friendly property.
Investors, now is a great time for a portfolio upgrade.

Please call one of our team for a chat about your investment strategy. 

Suzannah Toop

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Thursday, May 22, 2014

Love. Marriage. Homeowners. Gen Y are mixing it up!

Three weeks ago, a very big event happened in my life. Tom, my best friend of 7 years got down on one knee and proposed to me. I couldn’t think of a better way to spend my 28th Birthday! Since that day I have been thrown head first into the world of weddings! 

What has stood out to me in these last few weeks after speaking with my Nanna, Mum, family and friends, is that the things you now have to think about are very different than they have been for previous generations. 

I listen to stories from Mum and Dad - they married at 22, and only then moved in and bought a house together. For their generation, it was still considered taboo to live together, and in some ways this made things a lot simpler. 

There’s no doubt about it, Gen Y’s are taking a lot longer to settle down. The median age of marriage in Australia sits at 29 for females and 31 for men. We are a generation of independent people, and by the time we are thinking about getting married, we may own a number of assets individually. This is where things can get complicated, but can also be an awesome opportunity. 

For those who own property and have partners living with them for more than a few years, it’s is a matter of being aware of the way the law sees this and how, regardless if you are married or not, it affects the equity in your home.

It’s often something that is hard for Gen Y’s to talk about and for our generation this is the part that is taboo. But with people not settling down until their 30’s, and with many people moving in and living with their partner before marriage, it is just a matter of being aware of the risks and making sure you are protecting what you have built up over the years. In our line of business, this is a trend we are seeing too often, and it can get complicated. We are seeing people having to sell their property when their relationship ends, because they were either unaware of these implications, or naively, chose to ignore them.

There is also a very exciting upside! While there may be risks to be aware of, this independence and asset building throughout your 20’s is an awesome opportunity! The fact that you can combine your resources together with your partner provides a fantastic start to married life. 

A couple I know really well are in this very boat. Throughout their 20’s they purchased their first homes individually, and they are now at a point where they’re working out how they move in together and  best leverage these assets. 

Do they sell both properties and pool their resources to buy a larger home? Or, do they keep these properties and start an investment portfolio using the equity in the properties to buy a home together? 

What I’ve explained to my friends, after looking at their properties, is that with the market running hot, and the first home owners grant running out for established homes by June 30, it is actually a great time to look at the option of selling one or both of their places. Both properties are currently classified as principal places of residence, so there are tax implications with the way they are funded, and capital gains that become a part of the decision mix. However, with these types of properties in high demand from first home buyers, right now is a great time to put them on the market. First home buyers are keen to purchase before the end of this financial year to take advantage of the grant. Demand has been very high.

While this might be the best thing for my friends, everyone’s circumstances, tax situations and properties are different. If you are at the stage of assessing your properties and would like some more information on how to leverage these, find out what the current market is doing and get some good advice, we can help. Your accountant and solicitor can help you with the tax and asset protection and we can help you on the investment strategy and sale or rental side. 

So, while Gen Y may be breaking the traditional moulds and mixing it up, fantastic opportunities are coming from this. It is so exciting to see the opportunities that come from starting your property portfolio early, and we love being able help people make the most of this amazing stage in their lives! So, even though it may be hard, have the taboo conversations about the financial subjects, sort out a plan, and go for it together.

Genevieve Toop

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Thursday, May 15, 2014

Budget week...I like a simple life.

Listening to the amazing spin, rhetoric and character assassinations in the media this week, I must say, I found it a serious turn off. If only life could be made more simple and we could unwind all the twists and turns of promises made by our 'leaders'. The term 'heavy lifting' in the context of taxation was repeated over and over, but are we keeping our eye on the ball as a nation while all this politicking is going on?

I was in China two weeks ago on a real estate study tour and couldn't help but be overwhelmed with what is going on over there. Freedom of speech within the communist regime is not a given, with filtered information, limited social media and only 'approved' websites available to access. Probably not something many Australians would enjoy, not for long anyway. 

Speaking with our Australian peers who were also on the trip and from other states (in particular Sydney and Melbourne), the level of activity of Chinese buyers in Australia's most prestige residential property markets is staggering. According to an agent from Melbourne, one in two auction buyers in prestige suburbs, such as Toorak and Brighton, are Chinese. In Sydney, prices are being driven by the incredible influx of Chinese money and their thirst for quality property. 

The contrast between the two country's government practices and media behaviour is interesting… as is the contrast between Australian wealth and emerging Chinese wealth. 

The statistics we were given at the conference showed $5.9 billion invested in Australian property amongst our Chinese population of one million. One big attraction to the Chinese is that Australian property is sold on a fee simple freehold basis, whereby our Australian system of property ownership is ownership forever. In China, you buy a 70 year right to a residential property... that's all! It's no wonder we're seeing so much interest… it must be an appealing concept to buy outright ownership of Australian property.

Casual conversations with locals in Shanghai were fascinating. Chatting with those in the know, it seems that an approval to purchase in Australia isn't of any great concern as 'there are always creative ways around any potential issue'...? Personally, I have no idea whether there is or there isn't. 

So... given we are obviously so short of money over here (listening to all the carry on over the budget), and given there seems to be endless rivers of gold from those looking to invest from outside of the country, wouldn't it make sense to tap into those buying up our assets, rather than just having us share the heavy lifting? After all, when it comes to buying Australian property, it's not just a 70 year deal… it's forever.

Why not double or even triple the stamp duty on all foreign purchases… it would slow the inflationary effect for the housing market and it would swell the government coffers for the moment… it would also make selling our Australian assets more of a commercial negotiation. Seriously, it wouldn't be a big deal for most of these buyers and it would give Australians a hand with the heavy lifting and help sort our finances. Alternatively, could we be more savvy and match the 70 year ownership rules… mirror the purchase conditions for foreign buyers? This would provide long term sustainability of our assets and retain our capital. 

If we are to sell off our best properties, for life, why not make it worthwhile for all Australians?
You see, I am already anticipating emails and calls flooding in complaining about this comment with a thousand reasons why it shouldn't happen... perhaps it's just too simple. I'm all for free markets, I just don't want everyone thinking we are a country of wood ducks.

The Adelaide Market... The market has been great, unbelievable sales… so things can't be bad out there. Don't get caught up in all the doom and gloom, clearly people with a lot more money than most of us are excited about what we have to offer in Australia. The next cycle has begun, yeah!

Anthony Toop

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Thursday, May 08, 2014

Embrace the unknown.

After 9 months of passively 'browsing' the web for properties, I finally bit the bullet and purchased my first residential property. I have grown up in real estate and know the process inside and out, but to personally take each step is a very different experience.

As a person who likes to plan things and for whom purchasing items over $100 takes weeks of consideration, purchasing a property all happens very quickly. After months of looking at property and attending inspections, it was a two minute phone call that suddenly launched a whole chain of events. I was officially a home owner.

After being the highest bidder at auction and having the property held over, I bought my home only hours later under auction conditions. With a 30 day settlement the race was on! The deposit was due, I had a conveyancer to appoint, insurance to arrange, funding to confirm and a looming settlement date. I was quickly thrown into the world of a purchaser.

In our business, we help people buy and sell homes every day. As a first home buyer, it is eye opening being on the other side of the fence and experiencing the journey our clients go on and the emotions they feel. There are so many unknowns, (timeframes to meet, papers to sign…) and I now know just how important it is to ensure you feel at ease with the process and are not left asking 'what's next?' These are the unknowns that can make purchasing a property extremely daunting, and also why many potential buyers don't take that final step.

Even for the seasoned investor, these unknowns can be concerns such as whether you will overcapitalise, what the market conditions will look like, how long it might take to find a tenant and ultimately, what rental return you will achieve.  These are all mental hurdles that can affect a decision on whether or not to purchase an investment property… And there always seems to be a reason holding you back.

So, what have I learnt? Find a finance professional to guide you, an agent you can rely on and an experienced conveyancer to help you through the process and ensure you stay informed and comfortable.  Whether you're considering adding to your investment portfolio or buying a home, take that final step and embrace the unknown.

Suzannah Toop

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