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Is it possible to renovate your house and keep up the mortgage repayments?

YES, it’s absolutely possible to do a basic renovation and pay the mortgage. It’s all about planning and patience.

Let’s take the old rule of thumb; that a basic home renovation should cost around 5% of the purchase price. With housing prices in Australia as they are, you’ll need around $40,000.

Just say you took advantage of the current once-in-a-generation low interest rates and decided to save around $8,000 a year while paying your mortgage. Not easy. But if you could do it, or come by the money some other way — an unexpectedly large tax return, forgoing overseas holidays, that kind of thing, to get the renovation money would take you about five years.

Remember, we’re not talking about a complete house overhaul here as that can cost hundreds of thousands. It’s perhaps remodelling two bedrooms into three, or maybe a new kitchen and laundry. That kind of thing.

The biggest question is — can you manage the expense of the renovation while still prioritising your mortgage payment, given we’re so often told that building costs can blow out by up to 50 per cent?

And we are talking about doing it the old fashioned way, finding the money and only renovating once you have the cash yourself — not turning to renovation refinancing or a personal loan.

Sonya Pala is the co-founder of The Decorating School in Sydney, a business that holds workshops around Australia helping people renovate their home while sticking to a budget.

She says managing a renovation alongside a mortgage just takes careful planning. A clear idea of what needs to be done before you begin, some due diligence in getting comparative quotes, and a big picture budget and project schedule means you can manage even a large mortgage alongside a renovation.

“The key is planning and being realistic about what you can afford as well as what parts of the project are priority for you,” Ms Pala says.

“It all comes down to detailing the work needed for the renovation, assessing the true costs of the entire project and then putting together a realistic budget. Always ensure that you are getting regular updates from your builders to keep track of the projected costs and keep a 10-15% contingency in place for unexpected works.”

And a really clear idea of how much money is needed upfront is essential if you’re also outlaying on a mortgage each month — particularly as a first homebuyer, or if you have a mortgage that’s a big chunk of your wage.

“Putting the numbers onto a page will help you work out what items to splurge on and areas in which you can reduce costs. This in turn will help you ascertain how much you can afford to pay every month and therefore how you can manage mortgage payments as well as a renovation,” Ms Pala advises.

“Define what the payment schedule will be. It always helps to get the costs defined and once you have a total estimate, you can work out how it fits in with your budget”.

Don’t be afraid to piecemeal a renovation as and when the funds become available — with careful quoting due diligence, it isn’t actually more expensive, as many people will tell you.

And lastly, your mortgage is the number one priority. So you may have to get creative if the estimated cost is simply out of reach after paying the mortgage each fortnight. “You can either phase the project out so you’re decorating a small area or room at a time, revise your wishlist and reduce costs by amending your plans, or look for more cost effective ideas”.

Original Post: Here

Written by Jo Callan from www.news.com.au dated September 17, 2017

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There’s one thing this expert says you should do before buying a house

IT’S the debt we all like to forget we have, and Australians owe a combined $48 billion.

But while a HECS or HELP balance is the best debt you can have, given that it doesn’t attract interest, ignoring it could harm your finances in less obvious ways.

And you might want to think about paying it off before you saddle yourself with a home loan, Finder money expert Bessie Hassan suggests.

“Even though this is no-interest debt and therefore better value than commercial interest-laden debt, it’s still a good idea to clear it as early as you can and before you look to acquire any further debt, as further debt will be more expensive to pay back and therefore more difficult to clear,” Ms Hassan said.

And, she said, your HECS debt could impact on how much the bank will lend you to buy a house or car, because your income is reduced by the repayments taken out of your wage each week.

“It’s worth considering paying off this HELP debt as soon as possible to rid yourself of the burden of having an incremental chunk of your wage being taken out every year,” she said. “This can make you more attractive to a lender.”

If you are paying the minimum amount off your student debt while you earn the median full time wage of $82,804, you’ll have $5382 taken out of your pay each year. For those who fall into the $95,627 to $101,899 income bracket, the maximum annual repayment is $7642.

An analysis of ATO data by finder.com.au found that the amount of HECS and HELP debt has doubled in size in the five years from 2011 to 2016, rising from 1.6 million Australians owing $22.6 billion to 2.5 million Australians owing a mountain of debt valued at $47.9 billion.

Almost half a million of them owe more than $30,000, accounting for about 46 per cent of all HELP debt.

“This number keeps creeping up, and it could take graduates years to repay,” Ms Hassan said.

Until January this year, those who opted to make extra payments towards their debt were given a 10 per cent discount, but this incentive was abolished by the Turnbull Government.

THE GREAT HOME LOAN CHALLENGE

As young Australians battle to enter the housing market, with rising property prices making the task of saving a deposit ever more challenging, it seems counterintuitive to put extra cash towards paying down a debt that only increases in line with the cost of living, measured by the consumer price index (CPI).

That’s about two per cent a year under current economic conditions; compared to a personal loan, on which the banks will charge about 12 per cent a year in compounding interest, it’s a very good deal.

And, despite calls for reform, your HECS dies with you; when you pass on, your debt is wiped and it is not passed on to your estate.

But, Ms Hassan said, paying it down before you pursue the home ownership dream may still be worth it.

“Once your HELP debt is paid off, you’ll be keeping more in your pocket from what you earn at work — and potentially get a larger tax refund,” she said.

“While this may not seem like much, this could be the shortfall in completing a deposit on a loan.”

The extra cash could make it easier to both save for a deposit, and service a home loan, depending on “your income, the amount of other liabilities you have, and the property purchase price.”

“Making extra voluntary payments can be good if you have no other debts and if you have spare cash to put towards your student debt,” Ms Hassan said.

“On the flip side, if you have other debts, such as a personal loan or credit card, you should work on servicing this debt first as you’ll be charged interest.”

It only becomes compulsory to start paying off HECS or HELPS debt once income exceeds $54,869, a threshold that is adjusted each year.

Australians can make a voluntary repayments on their HECS or HELP debt at any time through their tax returns.

While no interest is charged on the debts, they are indexed on June 1 each year to keep pace with inflation.

 

Original Post: Here

Written by Dana McCauley, from www.news.com.au.

 

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THE 2017 ANNUAL BUDGET: Four Important Government Measures that will affect us all

The recently conclude 2017 National Budget has changed the playing field around the housing game. Treasurer Scott Morisson in his speech to the House of Representatives last 9th of May 2017 claimed that the 2017-18 Budget was a “fair and responsible path back to a balanced budget.”  Some measures contained in the national budget affects, not only the entire nation in general but specifically the real estate industry.

We have listed four major points below:

  1. First home saving within Superannuation – First-home buyers will be able to voluntarily contribute up to $15,000 per person per year ($30,000 total) to their superannuation to be set aside for a house deposit, and this makes it easier to save for a home deposit. This voluntary contribution called First Home Savers Scheme where savers can contribute from their before-tax income into their superannuation fund and be taxed a 15% superannuation tax rate. Withdrawals will be taxed at marginal rate, less 30 percentage Tax offset.
  2. Elderly encouraged to downsize properties – Elderly Australians (who are65 years old and above) are encouraged to downsize and move to smaller properties, and will be able to contribute up to &300,000 from house sale proceeds to their superannuation at a non-concessional rate starting this July 2018. Both partners can do this, meaning combined, a couple can contribute a $600,000 superannuation. This will be an additional super contribution, and wont be subject to the usual contribution caps and voluntary contribution rules.
  3. National Housing Finance and Investment Corporation (NHFIC) – a bond aggregating body will be established to fund cheap, longer term finance for community housing.
  4. Other Housing Affordability Measures
  • Vacant property penalty will apply to foreign-owned properties vacant for more than 6 months of the year. Foreign investors will be slugged $5,000 if they don’t occupy or lease their property for at least 6 months each year.
  • Capital Gains Tax (CGT) will be denied to foreign and temporary tax residents for properties bought after budget night, with existing properties grandfathered until 2019-2020
  • A 50% cap on foreign ownership in new developments – developers wont be able to sell more than 50% of new developments to overseas buyers.

With readings from: ANZ, BusinessInsider, ABC & TheConversation

 

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The wisdom of buying an investment property for under $500,000

In most capital cities of Australia, apart from Melbourne and Sydney, there is still a plentiful supply of properties under $500,000 for sale.

These capital cities include Brisbane, Perth, Adelaide and Hobart, as well as major regional centres such as the Gold Coast in Queensland and Bunbury in Western Australia.

Perth, for example, is now a property investors’ paradise, with many properties located within a 20- kilometre radius of the CBD and listed for sale for under $500,000. This is around half the median house price of Sydney. Properties in these competitively priced capital cities offer a low-risk entry into the property market with the potential for capital growth.

It is especially important that first-time investors take a conservative approach to their property investment purchase and focus on buying an investment property for under $500,000.

Too many first-time investors over-expose themselves financially by purchasing an expensive investment property which can limit their ability to buy multiple properties. This is particularly the case if they purchase an expensive property in the wrong location, potentially resulting in a financial nightmare.

In contrast, buying a lower-priced property that has the potential for strong capital growth can be an important building block to establishing a successful property portfolio.

Lower-priced properties also tend to have higher rental returns and this factor is important during a climate of rising interest rates, with the major banks increasing interest rates for investors over recent months.

Issues you should consider when buying a lower-priced property include:

  • Spend time researching all aspects of the property market before even looking for an investment property. Issues, such as negative or positive gearing, rental returns and depreciation have to be considered by a first-time property investor;
  • Past trends in property values are generally an indication of future trends and it is wise to examine the long-term capital growth rates of the suburb;
  • Take a broad approach to buying an investment property. Most first-time property investors buy a property in their local neighbourhood because they are familiar with the area. By taking a narrow approach to the location of the investment property, first-time investors severely limit their options;
  • Try to target suburbs in lower-priced areas which have a higher number of properties for sale;
  • When you have selected a suburb, don’t make an emotional decision when choosing a specific home. Most first-time investors purchase a property they would like to live in. It is important to remember that the investment property must appeal to a tenant who will be paying the rent;
  • Check out any planning changes proposed for the suburb. Many local governments are undertaking reviews of zoning which could have a major impact on property values. For example, a property that was purchased for a single residential use and rezoned by the local council as a triplex site will increase substantially in value. The planning department of a local government can advise first-time investors of any proposed zoning changes;
  • Check out any planned infrastructure changes for an area you are interested in buying. For example, an upgrade of a local shopping centre or plans for a new railway station can have a major impact on local property values;
  • Make sure that there are tenants prepared to rent your property. Rental income is a key factor in serving the loan so if you cannot find a tenant, you will have problems keeping the investment property over the longer term; and
  • Check your finances before you consider buying an investment property. If you have pre-approval finance, it will allow you to move more quickly to secure the right investment property.

 

By: Paul Bennion from www.smartpropertyinvestment.com.au

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Retirement Might Be Closer Than You Think—If You Do These Two Things

You can retire earlier and be better than you think if you make the right choices today.

The vast majority of Australians are far from prepared for retirement. Most are so far behind that the chances of catching up by conventional means are low. This is only compounded by the choices they continue to make on a daily basis. So, if you are not yet one of the top 1 percent on track to retire with confidence and with a high quality of life, what can you do to change things for the better?

Spend Smart

Despite living in one of the wealthiest countries ever, Australians are in poor financial shape and live in anguish because they have simply allowed themselves to become nothing more than consumers. TV evolved into “smart” phones, and now we are on the verge of seeing all our “smart” homes installed with devices that feed us constant shopping suggestions or even shop for us.

One way to change this dynamic is to question and evaluate every dollar we spend and borrow. Ask whether your purchase is really taking you closer to your real goals. If not, it is taking you further from them. Perhaps we could be spending less on depreciating items and invest in cash-producing things instead.

Start Investing ASAP.

By investing in income-producing assets first, we are able to change this dynamic. We can multiply our income, and we can earn while we sleep, eat, spend time with family, or work 9-5 jobs. That surplus can be used to cover expenses, reinvest, or grow a nest egg for retirement and beyond.

Of course, what we invest in matters. Stocks have surged to new highs, but few believe this run will last. I prefer investing in real estate for a variety of reasons. It offers passive income and a hedge against inflation. It’s also a tangible asset that won’t be vaporized by emotional trading, and it can simultaneously build wealth and cash flow.

Not everyone has the cash or credit to go out and buy a bunch of rental houses, though you can partner up with others. If you can combine your capital with others, you can invest passively now. If you do not have any capital, partner with someone who does, and use your time as a resource and invest actively.

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How to pick a winning property investment: 7 points to consider before investing in Real Estate

So it’s your first time to dive into property investing. You are both cautious since you will be spending a big amount of money that costs you your lifetime of savings and salary and excited as well because you are looking forward to the return on your investment in the years to come. This mixed emotion is pretty normal, as risk and return are both part of any investing decisions. However, with the help of investment consultants such as Investors Advisors Australia, you will be guided along in your property investing journey, that would mean we are able to calculate risk we are willing to take, as well as leverage on the information, learning and experiences of these consulting firms to our advantage.

However, on the personal side, we need to understand how the property market works, because at the end of the day, you are the one who will decide on which investment to take and consider.

So now, how do we know that a certain property is a good property to invest in? The key to a having a great investment is all about knowing which markets are about to rise in value, and I am talking about LOCATION. We need to know which locations have a potential to grow so we could get in and position yourself early before the wave rises. And once you are already on the wave, all you have to do is ride on it and wait for the proper timing when you can maximize the return of your investment.

Here are the 7 signs in the market that gives us a hint that a certain urban centers and suburbs are emerging and that their value is about to soar:

  1. Demand is high than supply – the law of demand and supply is very basic and this dictates the market’s action to price. If demand in a particular market surpasses that of supply, any available inventory in the market will be snapped up quickly. This would mean that the average a property stays on the market is short and is going down. There are plenty of factors that drive the demand in market, and one of this is the shifting demographics. An exploding population means a higher instances of people wanting to live and work in the city and on its fringes, thus increasing the demand for properties.
  2. Fewer available properties – this is the opposite of having a high demand, where supply of properties dwindle in a short period of time. It means there is less stock on the market and that real estate developers are not building and developing projects at a rate of the demand. Any available inventory in the market will easily be snapped up.
  3. Falling Vacancy Rates – Since there is high demand due to shifting demographics, some would prefer to rent than to buy due to availability of properties. If the vacancy rate is dropping, this would mean that there are fewer tenants in the market than available rental properties, and this would result in rental price increase as some landlords or investors seize the opportunity for higher returns.
  4. Growing Rental Yield – this is the result of point #3. Rental price increases due to limited supply. And as the demand increases, the popularity of a certain location also increases, thus increasing the influx of people moving into that location. Investors then would follow since they will be attracted by higher rental yield, thus increasing market activity.
  5. Lesser discounts and promos – Since there is great competition among developers wanting to have a pie in the supply, vendors will eventually stop giving discounts to lure buyers. Demand is enough to drive the properties at the market.
  6. Rise in Auctions – you can notice also that aside from real estate developers, home owners also would want to sell their properties through auction. Auction have a unique potential to push a selling price even higher. A rise in auction and auction clearance rates in a particular location could be a sign of surging market.
  7. Plenty of online interest – many people search for properties online, and the demand generated by online property portals is one of many indicators that a certain urban center or suburb is attractive to the population – both investors and buyers.

There are plenty of tell-tale signs in the market to tell us that a certain location is an investment-worthy. It is just a matter of keen observation and be updated on what is happening in your locality.

Investors Advisors Australia has information on what’s the best urban center and suburbs in Australia that are performing well on the real estate market and are perfect for investment. Also, you may want to join in one of our free investing forums to arm yourself with the most current information about real estate in your city. Contact Us now for details.