buyerschoice Archives - Page 2 of 3 - Berwick Mortgage Broker

Jun 20

Explainer: Capital gains tax

If you buy and sell an investment property, you may be required to pay capital gains tax (CGT) on that sale. It’s important to understanding this tax when buying or selling a home.

What is CGT?

This is a tax that you are required to pay on any capital gain earned on the sale of an asset such as a property. CGT applies to any asset obtained after 19 August 1985.

What is a capital gain?

Put simply, a capital gain is made when a profit is made from the sale of an investment, so when the sale price exceeds the original purchase price. If you sell an investment property for less money than the purchase price, you will have made a capital loss. An industry expert can help you work out your net capital gain or loss.

Calculating CGT

It’s really quite simple. For the sale of a single investment, take the selling price of the property then subtract the amount you originally paid for it, along with any associated costs such as stamp duty and legal fees. The amount remaining will be your capital gain. If you make a loss rather than a gain, you will not be taxed.

You may be eligible for a 50 per cent reduction of the CGT payable if you purchased the property after 21 September 1999 and owned it for at least one year before selling, and the property was purchased by an individual, trust or complying superannuation entity.

Exemptions

While any investment properties sold will be subject to CGT, you do not have to pay this tax on every property you buy and sell. Your main place of residence is exempt, as long as you have never rented it out.

You also are not required to pay this tax at the highest marginal tax rate. Any capital gain obtained will be added to your taxable income and then taxed at the relative margin.

Find an MFAA Approved finance broker who can help you finance you investment property purchase.

This article is for information only; please seek advice from a tax adviser before making any decisions.

Owning Property by Alan Sarkissian

Jun 8

What can you expect your property manager to do?

A property manager’s role includes collecting rent, of course, but they also manage your relationship with the person who lives in your property, so it is important to find a property manager who will do the best job of keeping the tenants happy and will get you involved only when you want to be.

Property managers market the premises, select tenants and organise the lease. They coordinate the payment of rent and call tradespeople to make repairs when necessary.

However, further to these duties, there are subtle elements of property management that often go unnoticed by the average landlord, which could be referred to as ‘tenant management’ or ‘relationship management’. Good relationships, clear communication and even better service go a long way towards keeping tenants in a property to minimise rent-free periods, and towards making it easy for an investor to own a property without having to think about it often.

“There’s a balance between what the legislation says, what the client wants and what the tenant wants. And it is our job to strike that balance, essentially,” explains REINSW Property Management Committee Member Lisa Indge.

“It is very much a people focused service, and I would suggest that the most important thing in property management is people skills. It is our priority to take care of the client first. But it also important to understand that having a broken relationship with the tenant is not in the owner’s best interests,” Indge adds.

“We are mediators, what we are doing is softening things from one side to the other to try to come out with a reasonable outcome for both parties.”

And this ‘from one side to the other’ doesn’t just mean that a property manager should provide good service to the tenant. They should also be able to tailor their service for the different needs of individual landlords and properties.

“There are different types of investments, but also different types of investors,” says Indge. So, while some landlords live interstate or overseas, others live around the corner from their asset. Some have no connection to the premises, while others once considered the property their home and are very attached to decision making.

Investors should make it clear from the outset just which camp they fall into, and find a property manager who is happy to involve them to the desired degree in decisions and maintenance. “It is important to have that communication with the client and an understanding of where they are coming from,” Indge explains.

Before you take the plunge into property investment, speak to an MFAA Accredited Finance Broker about the best ways to finance your purchase.

slide by Alan Sarkissian

May 31

Should you manage your investment property?

While managing your own investment property can seem like a simple way to keep more of the rent flowing towards the mortgage, there’s a little more to it than making sure the house is standing and collecting the money.

Managing your investment property appears pretty straightforward: you find a tenant, they pay rent and you keep a close eye on your asset. It’s cheaper, and may suit people with the know-how and available time necessary to sustain a financially viable real estate asset.

If you have a reliable tenant willing to pay market rates and you know how to protect your rights and your tenant’s rights in the event of a mishap, chances are your investment will run smoothly. But there are some very important factors to consider before donning the managerial hat.

Firstly, there’s a lot of legislation in place to protect tenants and landlords. If you don’t have the means to become familiar with the law, running the books on your own might not turn out well.

“Knowledge of the legislation is the most beneficial part of what we do for our clients. That is something that we encounter continuously: breaches and other issues,” explains the finance broker.

“The legislation is very grey. A professional property manager will have the experience and knowledge to guide their client as to each case and what the likely and fair outcome should be.”

DIY property managers also need to manage lease agreements, rental payment authority, bond lodgement forms and property inspection reports. In the case that something goes wrong, the correct implementation of these documents could be the difference between a win or loss at the relevant tenancy tribunal.

Property managers also market the premises in order to ensure that you get a good price, and the property may be more appealing simply because renters know they will be dealing with a professional rather than an owner.

“Prospective tenants prefer to deal with an agent. They tend to shy away from self-managed properties because they like to have the middle-man,” the broker says.

While self-managing is right for some, having a professional, trustworthy manager available to handle inquiries, damage or a broken lease can pay off for other owners. It all comes down to whether or not you can commit the time and effort needed to ensure your investment needs are met, as well as the rights of your leasing tenant.

Speak to an MFAA Accredited Finance Broker about how to finance an investment property purchase.

slide by Alan Sarkissian

May 24

What to look for at an open house

There’s an old saying that you should never judge a book by its cover, and this is true for houses – after all, who would buy one having never seen more than the front door? Open inspections are opportunities to really flick through the pages, and here’s how to take full advantage.

Really use your senses

Sniff, peer, listen and feel as much as you can. Your nose might pick up a mouldy or musty smell that may mean damp. You might spy small or hidden cracks that could mean structural issues. That clattering sound when water is running? That can be a sign of serious plumbing problems.

Don’t be distracted by the beautiful bling

Anyone can invest money in pretty cushions and lamps to set off the house. Or bake some cookies just as the open inspection starts so the house smells cosy and homey. But when buying property, you’re buying the sausage not the sizzle, so look past the perfectly presented and lit lounge room to the size, shape and placement in the floorplan of the actual room, and imagine how you will use it.

Look up

That means checking the roof on the way in and looking at the ceilings in the rooms. Damp and leakage issues are costly and notoriously hard to fix. And once the rot sets in, it’s there to stay.

That kitchen and bathroom advice

It’s true what they say. If these two rooms aren’t how you would like them to be, are you prepared to live with it or spend the money required to transform them? According to Archicentre, kitchen renovations in Australia have an average cost of $10,608 to $31,722, provided that the room is in good condition and doesn’t need any significant structural renovation. Bathroom renovations will be upwards of $10,000, and probably a lot more. Check the Archicentre Cost Guide for an idea on what you’ll be spending.

Look at your surroundings

Who and what are your neighbours? Check out the location at different times of the week and day. It may sound excessive, but maybe the house is under a window-rattlingly low flight path only when the weather is bad, there’s a bar across the road that blasts out loud music in the early hours but is closed during the day when inspections are on, or there’s a factory down the road that when the wind blows a certain way sends nasty smells wafting. If you have kids, what are the local school like? What is the local crime rate?

Ask lots of questions

What are the utilities like gas, electricity and water costing the current residents? As the Property Institute says, a home with large windows seems bright and sunny, but it can also make for more drafts in winter and warmer rooms in the summer – both problems that make for higher utility costs. It’s also important to ask about previous repairs and renovations; if something goes wrong down the track it can be good to have a history.

Have a pre-purchase building and pest inspection

This may seem obvious but many houses are bought and sold without one. Home inspectors are trained to find flaws in a home that your untrained eye may never see as a problem, but may cost a lot to correct down the line. If it’s your dream home, you may choose to buy it even with structural or pest problems, but you’ll no doubt be able to negotiate on price.

Before you start looking at homes, talk to an MFAA accredited finance broker about how much money you can borrow and which type of loan suits you.

An MFAA Approved Finance Broker is much more than your average mortgage broker.

Owning Property by Alan Sarkissian

May 18

Why would I use a finance broker?

Because they can save you time and money.

As the home loan market becomes increasingly complex, more people are turning to finance broker . Here are some of the reasons.

Finance broker can save time

The choices now available in the mortgage market can seem limitless and completely overwhelming. You can choose to research the subject, the lenders and their products yourself, or work with a finance broker who already has that knowledge.

Finance broker give you choice

All finance broker have a panel of Lenders from which they recommend a loan. They have to become accredited with the lender to offer their product, and are required to keep up-to-date with their latest offers.

Finance broker can help find the right loan

The best deal is not necessarily the cheapest rate. A good finance broker will examine your circumstances and future plans to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth.

Most finance broker don’t charge you

Most finance broker don’t charge a fee for their service as the lenders pay them a commission for the loans they write. Most lenders offer the same rate via the finance broker as they would directly, and a finance broker could save you money in other ways.

Finance broker can help you avoid pitfalls

Many products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. Or, they may not offer the flexibility you require in the future. A finance broker can help you avoid taking out a loan you might later regret.

An MFAA Approved finance broker is not your average mortgage broker.

Home Loans by Alan Sarkissian