Mortgage information & property guide

• Saving a deposit
• Locating the right property
• Benefits of home ownership
• Why invest?
• Finding the right property every time.
• Being a landlord
• Managing the property yourself
• Using an Agent
• Property management agreements
• Agency fees
• Frequently Asked Questions (FAQ's)
• Refinancing
• The costs of refinancing
• Do I need to refinance?

• How many bedrooms do you require?
• Do you need the house to be family friendly?
• Will stairs on a double storey property create problems for some members of the
• Do you require parking? If so, how many cars? Garage, carport or off-street parking?
• Will you work from home?
• Is it necessary to have a large garden?
• How important are the views?

Once you know exactly what your needs are, you will need to decide on which suburb/s you want to live in. Most people have an idea of where they would like to live based on proximity to work, schools and public transport. If you are yet to decide which area to call home then ask yourself the following:

• Is the suburb safe?
• Is the suburb well maintained?
• Has the area been affected by slumps in the property market?

It is crucial to be informed about your own financial situation as well as that of the property market. The only way to know you have found a property at a bargain price is research. At Mortgagebrokersearch we suggest the following methods of research:

• Internet searches
• Newspaper articles
• Monitoring auction results
• Walking through suburbs
• Talking to locals
  
  

Benefits of Home Ownership

The benefits of home ownership are numerous and significant:

• No threat of eviction
• No short and interrupted tenancies
• No landlords
• No rent rises
• Capital gains
• Scheduled savings
• Ownership of the property and equity build up
• Total freedom
  
  

Why invest?

Investing in property is considered as a safe way to build long-term wealth. If you are a property investor you want to ensure your investment is safe and sound.

Investing in property has many advantages when it comes to building long term wealth and creating financial freedom. There are numerous benefits to investing in property and it is important to do your research in order to avoid any associated pitfalls and risks.

Investing in property can take many forms. Residential, commercial, rural and retail are just a few of the popular methods. If you are venturing outside the realm of residential property investing, speak to one of our experience members in commercial property and business financing to familiarise yourself with the specific implications.

Finding the right property every time

The main goal when looking for an investment property is choosing a property that will experience capital growth and high rental yields. Ultimately your investment property will provide a combination of both.

There are many different classes of investment properties, namely
Residential:

• Houses
• Duplexes
• Apartments

Commercial:

• Offices
• Retail sites
• Industrial sites
• Hotels and motels
• Caravan parks

Other:

• Self-storage facilities
• Rural and farmland
• Vacant land
• Retirement accommodation
• Holiday accommodation
• Public housing

When selecting the right area for an investment property, consider the following factors:

• Population: The more people willing to make a move to a new area, the higher the demand will be for housing.
• Transport: Look for areas with convenient methods of travel to and from major hubs and landmarks.
• Unemployment levels and household income: Unemployed people are generally less likely to pay their rent on time and will resist rental increases. Households with stronger incomes can afford to pay their rent on time and will not be greatly concerned with rent increases.

We recommend the ability in finding the perfect investment property at a bargain price is research. At Mortgagebrokersearch we suggest the following methods of research:

• Internet searches
• Newspaper articles
• Monitoring sales results
• Walking through suburbs
• Talking to experts.
  
  

Being a landlord

When purchasing an investment property you need to decide whether to manage the property yourself or ask an agent to manage it on your behalf.

Questions you need to ask are:

• How much money will you save by managing it yourself? Is it worth it?
• Are you prepared to organise all the repairs and deal with tenants?
• Are you ready for the responsibility that managing a property yourself involves?
• Do you know what your rights and responsibilities are?
• Do you know the tenant's rights and responsibilities?
• What are the tax implications?
• Do you need a depreciation report?

Managing the property yourself

Whether you decide to use an agent or manage the property yourself, as the landlord you are required to follow any State Acts which are relevant and carry out your responsibilities as a landlord.

As an indicative example a landlord in NSW must:

• Give the tenant a copy of the residential tenancy agreement (lease), property condition report, a list of all entry costs and a copy of The Renting Guide at the beginning of the tenancy
• Ensure the property is vacant, reasonably clean and fit to live in at the start of the tenancy
• Pay for all water and sewerage service charges
• Ensure the property is safe and secure
• Carry out necessary repairs to the property
• Issue receipts for rent paid in person or by post
• Respect the tenant's peace, privacy and quiet enjoyment of the property.

In NSW a tenant must:

• Pay the rent on time
• Keep the property clean and tidy
• Tell the landlord when repairs are needed
• Not use the property for any illegal purpose
• Not alter or add to the premises without the landlord's consent
• Not sublet the premises without the landlord's consent
  
  

Using an Agent

Using an agent to manage your property may sound expensive but many agree it is the best option. The agent can act as a buffer between you and the tenant, especially when problems exist. A managing agent's responsibilities (in NSW) will include:

• Finding and screening tenants for your property
• Having a tenancy agreement signed by the tenants
• Lodging the bond with the Department of Fair Trading
• Dealing with tenants in all matters
• Arranging repairs to the property
• Collecting the rent and transferring it to your account
• Conducting property inspections

Your choice of agent is paramount, so research a few agencies until you find an agent you feel comfortable with. Always certify your agent belongs to a reputable real estate industry body.

Property management agreements

When you sign with a managing agent, you are required to sign a property management agreement. Read this document carefully and try to negotiate on points you are uncomfortable with. You might like to specify that repairs costing more $100 require your approval as an example. The agent will then handle minor repairs up to that amount.

Standard agreements for property management usually contain a clause stating that a notice period applies to the termination of the agreement. It is in your interests to keep the notice period as short as possible, such as one to two months.

Agency fees

Agents normally charge a commission fee based on a percentage of the gross annual rental. This can be negotiated but it is usually 3-10%. Agents normally send you a monthly account but more frequent payments can be negotiated. The account shows the amount of rent paid to the landlord less any costs (including repairs) and agent's commission.

When you have a change of tenancy, you will usually be required to pay a letting fee about the equivalent of one week's rent but, as with all agency fees it is negotiable.

Frequently Asked Questions (FAQ's)

Q. Are older style homes better value?
A. Some people fall in love with older style homes. However older homes can often have structural problems that may involve unexpected costs in repairs.

If you are planning to buy an older style home be sure to check the following points:

• Has a builder inspected the property to ensure the house is solid?
• Will the council allow you to make renovations and structural additions?
• Are the bathrooms and kitchen in working order?
• Does the electrical wiring appear safe?
  
  
  Q. Would I be better off building my dream house?
  A. Although building a home may be rewarding it's not for the faint hearted.
  
  If you think building your own home is the only way to ensure you get all the features you need and want, keep the following points in mind:

• Is the proposed house going to meet my budget expectations?
• Have I budgeted for emergencies and other potential problems?
• Is my builder going to complete the project on time and within budget?
• Is my builder qualified and do they have a good track record?
• What happens if things do not go to plan and the home has defects?

Q. Will I save if I buy off the plan?
A.When buying off that plan, you are offered a discount in return for your commitment to purchase the property upon completion at a later date. You may also get the flexibility of choosing your own fittings and finishes.

However, building projects are rarely completed on time, so allow delays in your movement schedule. Also keep in mind the nature of the property market. If the market turns for the worse, it is possible that the property declines in market value.

If you are considering buying a property off the plan keep the following points in mind:

Developer's reputation: Find out whether the builder is reputable and has a positive track record.

Contracts: Get a copy of the contract and review it with a solicitor prior to making any decisions. The most important thing to consider is the clause regarding the completion date.

Other projects: Check on any other projects the developer has in progress and how close to scheduled completion they are. Go and see other projects completed by the developer to assess the quality of their work.

Purchase price: Check whether the asking price is realistic by comparing recent sales of comparable properties (preferably new) in the area. It's always worth attempting to negotiate a price when buying off the plan.

Plans: Get a plan of the apartment you're buying. A common risk with off the plan properties is that most contracts give the developer the right to re-arrange the floor plan.

Finishes: Ask for the schedule of finishes and inclusions. This outlines what inclusions such as carpets, light fittings and blinds to expect and should specify their colour, brand name and other important details.

Body Corporate Levies: If the project is an apartment complex, ask what the strata levies will be. Once an apartment building is completed, a body corporate will be set up to manage the building (especially the common areas) and collect the strata levies from each owner.




Q. What exactly do I get when I purchase a unit?
A.When you buy a strata title unit, you are buying the individual property and the right to use the common property of the building, as set out by the body corporate. In return you must pay regular levies for their upkeep and repair.

If a unit with views, no lawns and little maintenance is what suits your needs, ask yourself the following questions prior to making an offer:

• What are the Strata Title or Company Title restrictions?
• Are pets allowed?
• Does the body corporate have enough money in working accounts to maintain the building?
• Are there any large levies coming up which you may have to budget for?
  
  

Refinancing

Our experienced broker members can refinance and consolidate your existing loans to save you money and cut years off your repayments.

Refinancing your loan to the lowest possible rate and most favourable terms can save you substantial money and allow you to relax during tough times.

In some cases of refinancing the services of a solicitor are not required.

The broker you are matched with will be able to demonstrate what you are likely to save before you proceed. In some states, like NSW, you are exempt from stamp duty however there may be other fees or charges.

The costs of refinancing

Refinancing almost always costs money. The costs of refinancing can range from $1000 to over $3,000 depending on your individual situation. Below is an outline of the costs involved in refinancing.

• Break costs are a form of compensation paid to the lender for their loss of revenue.
• Mortgage insurance is usually payable when you borrow more than 80% of the value of the property. Don't be deceived by the name - mortgage insurance doesn't insure you. It insures the lender against the risk that you will default.
• Application, settlement and handling fees are further expenses charged by most lenders. They can reach up to $800.
• Discharge fees on your existing mortgage.
• Valuation fees to determine the value of your assets.
• Registration fees on your new mortgage

Our experienced broker member that you are matched with can determine whether your savings will outweigh the costs involved to substantiate a refinance.

Do I need to refinance?

There are many different reasons why people choose to refinance. Some examples are listed below:

• to renovate
• to pay off debt quicker and cheaper by rolling all current debts into one home loan
• to get a cheaper rate
• to raise cash for another purchase
• to switch from a fixed rate to a variable rate or vice versa.