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September 2008
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Watch, listen and learn. You can't know it all yourself...anyone who thinks they do is destined for mediocrity. Donald Trump Welcome message from Damian Collins 
Hello , Prior to this month's decision by the RBA, the last time there was a cut in interest rates was nearly 7 years ago. Back then, the median price of an established house in Australia was under $250,000. A lot has definitely happened in the housing market since then. But what will happen from now on? Will we see the start of another boom period? Of course, nobody knows for sure. All we can do is gather as much information as we can and make educated decisions based on what we expect to happen in the future. As Mr. Trump said we must watch, listen and learn. On that note, I would like to welcome you to the September edition of Property Wealth News, a source of information and property updates to assist you along your property investment journey. In this month's edition, we look at the issue of going green (is it a good financial decision?), we discuss the unsurprising decision by the RBA to reduce interest rates and we provide a multitude of hints and tips to assist you with your property investing. Remember, if you would like to speak to one of our consultants about how to improve your current situation or accelerate your investment plans, please call 1-800-000-159 and they will be happy to help and answer any questions you may have. Happy investing.
Damian Collins
Is going green good for your hip pocket?
Whether you're building a house, doing a multi-unit development or fixing up that "renovator’s delight" you just purchased, you’ll have to decide how much to spend on the construction to get the best possible return. So is it worthwhile investing in features that make your property more environmentally friendly? Could you make money from it? One thing is for certain, environmental sustainability and eco-friendliness has become a far more mainstream issue today than in the past. It is no longer simply the domain of hippies. And while green homes were once seen as visually unappealing (think of those unsightly solar panels), they have now become largely indistinguishable from their non-green counterparts. So it's fair to say that the market for green properties is a growing one. There is a seemingly endless list of things you can do to make your property greener. You can consider ways to make the property more efficient to heat and cool. This encompasses a wide variety of areas including the initial design and solar orientation of the property as well as what type of insulation you use. A major area of focus in the green community is reducing a property's energy consumption. The things you can do range from the simple, such as installing energy efficient light globes and appliances to the more expensive options such as installing solar panels. In Australia, conserving water is another important issue. Some of the things you can do in this area are installing a rain tank, and insisting on water conserving showers, toilets, washing machines and dishwashers. Establishing a drought tolerant garden is another positive step you can take. Some people take the issue further and decide to use only sustainable and renewable materials in the construction of their property. Some will also commit to using non-toxic paints to improve air quality. The point is that are numerous things you can do to make you property more eco-friendly. The added costs can range from a few dollars (for an energy efficient light globe) to tens of thousands of dollars. But will it pay off? If we address the issue with an investor's mindset, the big question is will it pay off? We know that it will be good for the environment and it could go a long way to reducing the running costs of the property. But will it pay off financially? Firstly, there may be government subsidies or tax credits for installing certain features. But this will be of minimal incentive for investors. In terms of lowering heating and cooling costs, there is often a direct return on investment. If you are an owner occupier, the longer you spend in the property the more chance you have to recoup the additional costs. But more often than not, an investor is not responsible for paying power, water and gas consumption bills. So the inevitable question arises, will a tenant pay more to rent a property that has lower running costs? Generally speaking for residential property I think it is unlikely. While many tenants would prefer an environmentally friendly property, when it comes down to the crunch I doubt whether most tenants would pay a premium. Most residential tenants do not think past the next 12 months, so the long term savings and benefits are not as important. At best an investment in green features could perhaps help to minimise vacancy periods by making your property more desirable. Commercial property is a different story, with tenants often looking at 10 years or more on a lease, so the energy consumption costs are a lot more important to a prospective tenant. We are now seeing "green ratings" being given to commercial properties and these are being used in prospective marketing campaigns. Will a buyer pay more for your residential property if it has green features? Practically speaking a house that saves the occupants money should be worth more. It will definitely help your property stand out, especially as society becomes more environmentally conscious. The issue of whether a green property will attract a premium from renters or buyers depends on the location. People in some areas may recognise the value more than others. The high end of the market is perhaps a good place to look for buyers who would be willing to pay a premium. Although, with most people facing increased living costs (petrol, food etc), the running costs of a property may become more important across the board. Conclusion The decision of whether to go green is a personal one and how far you take it is up to you. It can add thousands of extra costs to a new development or even tens of thousands. Retrofitting an existing property is even more expensive. However, if it costs you no more to go green (such as choosing a low-flush toilet system over a regular system) I think you’re crazy not to do it. If you are going to invest in making your property greener with the explicit goal of generating a financial return, choose the features that are most visible to tenants and buyers. A stylish rain tank may put a tick in the box for many people, but how many will appreciate the fact that the timber floors came from a sustainable forest? Go with the items that will give you the biggest bang for your buck. Of course, your reason may not be a commercial one and you may simply want to minimise the footprint you leave on the planet. This is of course commendable, even if there is no financial reward at the end of it.
Rates down for the first time in nearly 7 years In what was a widely anticipated move, the Reserve Bank of Australia (RBA) lowered the official interest rate by 0.25% to 7% during its September meeting. Governor of monetary policy, Glenn Stevens, said: "As a result of increases in the cash rate last year and early this year, additional rises in market interest rates and tougher credit standards, financial conditions have been quite tight. Some further tightening has occurred over the past couple of months. Conditions in international financial markets remain difficult, with heightened concerns over credit persisting." What was perhaps more surprising than the RBA's decision was how quickly the major banks moved to match (or even better) the change. Though, when you consider the bad publicity many banks have endured in recent times it wasn't entirely unexpected that they would jump at the chance to create some positive headlines. Banks may face more scrutiny to pass on reductions with many believing we can expect further cuts later in the year. Mr. Stevens was quoted as saying: "Weighing up the available domestic and international information, the Board judged that there was now scope for monetary policy to become less restrictive. The Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2-3 per cent target over time." One in four Australians aged 65 years and over by 2056: ABS By the year 2056, one in four Australians will be aged 65 years and over according to recent projections by the Australian Bureau of Statistics (ABS). The ageing of Australia's population is the result of sustained low fertility combined with increasing life expectancy. If the projections come to fruition it will dramatically change the makeup of Australia's population which is projected to increase to between 31 and 43 million people. With people expected to live longer, many may turn to property investment as a means of supplementing their superannuation income. According to ABS estimates 71 percent of Australians aged over 65 are currently living on incomes of less than $15,548 per annum. Property investment is definitely a strategy which can contribute to financial independence for retirement.
5 reasons why people sell below market value
Emma, a successful investor in her own right, is one of our Acquisitions Specialists. She has extensive experience working with investors and developers in acquiring residential and commercial properties; and development sites. It may seem crazy to you or I to think that people would sell property for less than it is worth, but it happens frequently. Let's look at five reasons why someone would sell a property below market value. 1. They don't care Some people and institutions simply do not care what the market value of a property is. For example, take the case of a mortgagee-in-possession. If a lender (usually a bank or finance company) has taken possession of a property, they just want to dispose of the property as soon as possible. 2. They don't know Some people may not do as much research on a property as they should. They may not have bothered to discover the zoning codes in the area. There may be an interstate seller who hasn't bothered to keep up to date with market prices. There are a number of reasons why someone may not know the market value of a property. 3. They don't want to sell at market value This is hard to believe, but some people actually don’t want to sell at market value. Often it is a bitter dispute between partners (life partners or business partners) and the parties turn vindictive toward each other. They would rather see the other side suffer than win themselves. 4. They believe they don't have a choice For some people, selling below market value happens because they don't believe they have a choice. For instance, the bank may be threatening them with repossession. Or they may have purchased elsewhere and either don't want to take out or cannot take out bridging finance. For whatever reason, in their minds they believe that they have little choice. 5. The emotional cost is worth more than the financial cost For whatever reason, some people do not deal with pressure very well. In property there is often a lot of emotional pressure added to the situation. People become irrational especially if financial pressures are building up, or the property has been on the market for a long time. Suddenly the emotional price is high and they would rather slash the price than have the uncertainty of not selling their home or investment property. The emotional quotient is highest when the property is the principle place of residence. For more information on how Emma can help you find and evaluate a great investment property, you can contact her on 1-800-000-159
Property Tax Tips - Are travel expenses deductible?
Damian is our Managing Director and founder of Momentum Wealth. As well as being a highly successful property investor, Damian is also a qualified Chartered Accountant and is passionate about educating property investors in all aspects of property investment. Let's say you own an investment property that is some distance away from where you live. Can you claim the travel expenses you incur when visiting the property as a tax deduction? Yes, you are allowed to claim travel expenses incurred in producing assessable income but there are limitations. The expenses you can claim not only include transportation costs (including car running costs and depreciation), but also include the cost of meals and accommodation if the property is a long distance away. Deductible travel will generally include: (a) Preparing the property for new tenants Some travel expenses are NOT deductible but may form part of the cost base of the property, such as: (a) Travel expenses to inspect properties to purchase Does that mean if you have a property interstate that you get to write off your holidays? Unfortunately the answer is no. Travel expenses must be reasonable. This means that you can't go for 10 days to inspect a property - you must have the predominant reason for travel to inspect your property and if you take some private holiday time then you need to apportion your expenses. It is likely that if you went to inspect the property once a year for 2 days it may be deductible, but if you go 3 times a year and / or you go for 10 days on a trip it is unlikely to be fully deductible. Momentum Wealth and its affiliated entities are not Accountants. While all information is provided in good faith, you should seek your own independent advice in relation to all tax matters.
Some of the ways to fix a bad credit report
Sudha is one our mortgage & finance specialists. She is adept at handling the diverse situations and circumstances often encountered by property investors and developers. If you would like to speak with Sudha about your own situation, call 1800-000-159 today. While there are a number of ways and means to get financing even if you have poor credit, there is no doubt that having a good credit rating is far better than having a bad credit rating or having no credit rating at all. Here are some ways to help you improve you credit rating. Pay your bills on time It sounds simple, but you should start by paying your current bills on time. I would always recommend paying all your bills on time, however, if you get into a difficult situation, and you have to prioritise your bill payments, I would recommend paying your credit cards first. The credit card companies are the most likely to report any late payments to the credit reporting service. You may find that your local council or your landlord is less likely to report late payments to credit reporting services. Also, do not simply ignore bills and hope they will go away. If you are going to be late, call up the service provider and ask for an extension. This will give you more time to get your act together and pay the bill, and possibly delay any notification to the credit reporting service. Apply for store cards - but not too many! If you don't have much credit history or a poor history, then you should consider getting store cards to establish or re-establish your credit rating. These are often handed out a lot more easily than regular credit cards. Evidence of consistent payment on the cards will help improve your credit rating. You should apply for one or perhaps a few cards only. Even if you have good credit, I wouldn't recommend having more than a few credit cards. Credit card companies report your applications to the credit reporting service. Therefore, if you apply to ten companies this action will be on your credit report for at least five years. A high number of credit applications may reduce your credit score. Furthermore, conventional credit providers will usually look at the existing credit facilities you have. If you have ten credit cards with a ten thousand dollar limit an each, the financiers will consider this as part of the potential debt when assessing whether to give you a loan. Get a personal loan Again, if you don’t have much credit history or a poor credit history, you should also try to get a personal loan from a bank or finance company to establish or re-establish your credit rating. Building societies, credit societies, and finance companies prefer to deal in this area. Go into your local financier and place a deposit of a few thousand dollars. Within a week or so, go back to the financier and tell them that you want a personal loan for a period of twelve months, secured by the deposit you have with them. They will probably wonder why you simply don't take out the funds you have with them. Simply tell them that you prefer to stick to a regular repayment plan and you don't want to diminish your saving. If you choose you can also tell them that you are trying to get a better credit rating. The repayment of this loan will be further evidence of an improved credit rating. The better your credit, the better your chances of getting a loan. No matter what small steps you take, a better credit rating and wider access to credit greatly enhances your wealth generating opportunities. For more information on how Momentum Wealth can assist you with your loan needs, contact Sudha on 1-800-000-159 Finance Broking Services are provided by Momentum Wealth Finance Pty Ltd, WA Finance Brokers Licence 3170.
Choosing the right property manager
Verity, our Property Manager is dedicated to helping landlords achieve a steady income, whilst minimising fuss and maximising the value of their investments. She is a successful property investor herself and demands a high standard from all tenants to help ensure our clients’ investments are always well maintained. You've spent considerable time and effort looking for the perfect investment property and after lengthy negotiations it's finally yours. You're confident this property will provide you with a strong financial return and it's now time to sit back and enjoy the ride. Not so fast. How much thought have you put into choosing the right property manager? A property manager can mean the difference between a smooth journey and a bumpy ride. They are responsible for preserving your property's capital value and maximising its income - much more than just collecting the weekly rent. They can provide a total management solution from finding and screening tenants, conducting regular inspections, providing market advice, and handling ongoing property maintenance. But how do you determine who's the right property manager for you and your property? Here are a few considerations to assist you: Don't focus exclusively on fees Many landlords only look at fees to determine who they will choose to manage their property but this is often a poor decision that they come to regret. With fees ranging from anywhere between six to twelve percent of your gross rental income, some may see that as excessive but you do get what you pay for, so remember, cheap is not always cheerful. How capable are they? Look for a company with a dedicated property management department. This shows serious commitment and means you don't need to worry that the receptionist may end up managing your property. This also protects you in the event that your property manager is ill or resigns as there's a number of other specialists there to assist. Tenants can cause the biggest headaches of all so make sure your agency subscribes to major tenancy databases and thoroughly screens prospective tenants on credit worthiness, rental history, and employment security. How important is your business to them? Consider how they present themselves and the effort they put in to win your business. A well presented agency who takes the time to answer your queries, view your property, and present a formal proposal to you is a good sign you won’t be just another number on the books and you will be looked after. Also ask how many properties they look after. Some individuals look after 200 or more properties each, while better agencies manage between 100 – 150 properties per person. You may pay a little more, but with fewer properties to juggle you can be confident your property will get the attention it deserves and the manager will take a more active role in maximising your property's worth. Read the management agreement Don't forget to read the fine print. Check what services are included and what you need to pay extra for. Some will include routine rent inspections and rent reviews, others won't. Will the property manager be present when taking prospective tenants through the property to ensure your property's security and obtain important feedback? When determining the best property manager for your property, remember the critical role they play in maximising your investment. With a number of responsibilities to handle, make sure they have the appropriate skills, value your business, and will keep your property performing at its best. For more information on how Momentum Wealth can assist you with your Property Management needs, contact Verity on 1-800-000-159
Passionate about property? WE WANT YOU!
Due to the continued growth and expansion of Momentum Wealth, we currently have vacancies for: To find out more please visit our new careers page
At Momentum Wealth we are committed to continually improving our customer service, which is why we conduct regular surveys of our clients. This week we would like to congratulate our Finance team for the overwhelmingly positive response we received from clients. Here is what some of our clients said when recently asked what they would say to someone thinking of using Momentum Wealth: "Save yourself a lot of time & effort, & let someone who understands the business do the work" "They are good in giving you advice and they are efficient in delivering their services." "It was very easy to deal with Momentum and everything was simple." "They are a professional outfit and very helpful." "You can trust Momentum Wealth to take all the hassle out of buying a house or borrowing money and more importantly get the best deal." If you would like to speak with one of our Finance team about your own situation, call 1800-000-159 today.
The Lighter Side of Wealth Building
What happened to my Lexus? A very successful lawyer parked his brand-new Lexus in front of his office, ready to show it off to his colleagues. As he got out, a truck passed too close and completely tore off the door on the driver's side. The lawyer immediately grabbed his cell phone, dialled 000, and within minutes a policeman pulled up. Before the officer had a chance to ask any questions, the lawyer started screaming hysterically. His Lexus, which he had just picked up the day before, was now completely ruined and would never be the same, no matter what the body shop did to it. When the lawyer finally wound down from his ranting and raving, the officer shook his head in disgust and disbelief. "I can't believe how materialistic you lawyers are," he said. "You are so focused on your possessions that you don't notice anything else." "How can you say such a thing?" asked the lawyer. The cop replied, "Don't you know that your left arm is missing from the elbow down? It must have been torn off when the truck hit you." "My God!" screamed the lawyer. "Where's my Rolex?"
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