Thursday, May 14, 2015

Dropping, dropping, dropped... Property investors, now is your turn to make some money.

It's historic times in the property market with the Reserve Bank of Australia dropping rates by 25 basis points to 2.0% two weeks ago. This is unprecedented. Borrowing is unbelievably cheap when compared to historic norms and largely driven by non real estate factors. So how do we think this will pan out across South Australia?

Across the board we are witnessing buyers making the most of the low rates, and are expecting the latest rate drop to continue to spur on activity.

For new entrants to the market, it's high fives all round as market funding is just so cheap, and South Australian prices are now disproportionately low compared to Melbourne and Sydney markets. 

So let's talk about money.

What about those who 'locked in' on their higher interest rates? Some of the more conservative investors in the market have been caught with a fixed rate, as at the time, the rates were considered market leading. Now with the benefit of hindsight many can see they should have gone variable.

There are plenty of war stories to go around, however the good news is, there may be some relief for investors being faced with this. 

Our Property Management team work very closely with Funding Options, a mortgage broking business headed up by Dom Cassisi, and together we are helping to increase our clients' returns substantially by reducing their funding costs.

A great example of this was last week. One of our landlords, a young family with a child, achieved a saving of $150 per week, $7,800 per annum on a loan amount of $544,000 over their two properties! They fixed two years ago at 5.75% (a cheap and market leading rate at the time) and now Dom and the team have put them on a three year fixed rate of 3.99%. It's huge, and they are over the moon!

A second example involves a landlord who has a substantial amount of equity in their investment property. They had a small debt over the property of $170,000 at an interest rate of 6.0%. They also had a personal loan and car repayments at a much higher interest rate. Dom and the team were able to refinance their investment property and increase the lending to pay out their debts at a variable rate of 4.4% (prior to the recent rate cut). This saved them $200 per week!

To put it in perspective, imagine your Property Management team calling you out of the blue to let you know your tenant is offering $200 extra in rent per week, without any additional work or expenses, just because.

In my view, it's money for jam.

Funding Options are supporting our landlords to navigate through this space and we are hearing good news stories appear from everywhere. 

If you are a landlord, irrespective of which company you are with (or which AFL team you support), make sure you give Dom a call on 0407 797 249 and have a chat.

Remember, when you are a landlord, you are in business and just like any business there are a number of factors to consider to maximise your profit, and maintain it. By taking a holistic approach to your investment you can add huge dollars to your bottom line every week. Dom and I would love to talk through how we can help with your investment properties so give us a call. I'm really enjoying working with our landlords (and Dom) and helping our investors in far more ways than just collecting the rent.

Suzannah Toop

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