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Suburbs that Qualify for the First Home Buyer Scheme

The housing market has shown a robust performance, despite the shock of Covid-19 which has created new opportunities for buyers.

The pandemic has impacted pockets of the housing market, where median values have dropped below the first home loan deposit scheme thresholds.

Recent housing value declines are particularly prominent in major cities like Sydney and Melbourne.

These cities accounted for around 75 per cent of international migration across the capital cities in 2018-19, meaning international border closures have created a particular demand shock.

On Wednesday, the minister for housing announced around 1,800 places would be re-issued from the first round of the first home loan deposit scheme.

This means recent value falls may have created an opportunity for first home buyers, where there is a maximum purchase price cap to qualify for the scheme.

As of January 2020, there was an average of 1071 suburbs observed in the capital cities with a median value at or below the qualifying threshold, assuming the application is for established property.

 

Established property has historically been favoured by first home buyers where benefits for both new and established property have been available.

That was further demonstrated in the slower utilisation of the scheme when it was made available for only new property.

Corelogic median dwelling value data reveals city suburbs where the median value fell below the established property price threshold since the onset of Covid.

This effectively looks at the change in the median value of all houses or units across a suburb between March 2020 and January 2021.

Note suburbs analysed include where Corelogic has high confidence in the median value, and there have been at least 50 transactions across the suburb over the past 12 months.

Suburbs that Qualify for First Home Buyer Scheme
SuburbCityMedian Value Jan 2021Median Value Mar 2020
KellyvilleSydney$675,785$747,661
Rouse HillSydney$638,755$726,900
ArncliffeSydney$690,441$721,626
HurstvilleSydney$651,924$716,943
AshfieldSydney$689,884$717,949
StrathfieldSydney$688,341$746,239
Wentworth PointSydney$686,114$715,019
GladesvilleSydney$698,034$751,558
RydeSydney$678,719$714,899
CaringbahSydney$679,373$717,427
KirraweeSydney$671,313$707,328
BalaclavaMelbourne$598,36$618,291
BrunswickMelbourne$579,828$608,147
DocklandsMelbourne$575,517$616,196
South MelbourneMelbourne$596,486$645,924
St Kilda EastMelbourne$579,514$613,683
ThornburyMelbourne$584,288$611,704
Ferntree GullyMelbourne$576,076$600,439
Beaconsfield UpperMelbourne$573,562$601,703
ClaytonMelbourne$570,988$636,567
OakleighMelbourne$575,210$628,533
South BrisbaneBrisbane$468,672$483,277
MunsterPerth$397,318$446,353

 

The list comprises 23 suburbs across the four largest capital cities.

In each of the suburbs, it is unit medians that have slipped below the threshold.

Unsurprisingly, six of these include unit values in the Melbourne–inner region, where median values have declined an average – $33,313 between the onset of the pandemic and January.

As noted in previous research, the inner region of Melbourne has seen particularly severe declines in rent and property values since the onset of the pandemic.

This is because the Melbourne-inner region has historically had particularly high exposure to housing demand from overseas migrants, such as international students, as well as people employed in tourism, hospitality and the arts.

Both cohorts have been particularly affected by the pandemic.

The same trends may explain the decline of median unit values in South Brisbane, where inner city Brisbane has also seen relatively high levels of overseas migration as a component of population growth.

While the impacts of Covid on some markets has seen a decline in values, upward pressure on prices may result from the resumption of interstate and international travel, as well as continued improvements in the Australian economy.

As more of the housing market is caught in a broad-based upswing, first home buyers could face more challenges getting into the market in the year ahead.

 

Data Source: theurbandeveloper.com

 

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Federal Government extends HomeBuilder program for another three months but at a lower rate

 

 

A Federal Government program offering cash grants for housing construction projects has been extended, but at a lower amount.

The HomeBuilder scheme currently provides $25,000 grants to eligible people building a new home or renovating an existing one.

It had been due to expire at the end of the year but will be extended to 31 March, 2021, at the lower rate of $15,000.

Prime Minister Scott Morrison said the extension was expected to lead to another 15,000 construction projects, bringing the total anticipated renovations or builds under the program to 42,000.

“Extending HomeBuilder will mean a steady pipeline of construction activity to keep tradies on the tools.”

 

Price caps and time limits changed

Property price caps for new builds in two states will be lifted for contracts signed between January and March next year, rising to $950,000 in New South Wales and $850,000 in Victoria.

The amount of time all approved applicants who signed contracts on or after June 4, 2020, are given to start construction will also be extended, from three months to six months.

The decision follows calls from the construction industry for more flexible deadlines, with concerns people could miss out due to a bottleneck of applications.

The Federal Opposition had also called for changes to the program, arguing it had failed to deliver on its promises and amounted to a “marketing exercise.”

The changes have been costed at $240 million, bringing the total expected price tag to $921 million.

Of the around 24,000 applications made to the scheme so far, the majority (19,180) are for new builds while the rest (4,697) are for renovations.

 

SOURCE: abc.net.au

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First Home Loan Deposit Scheme (New Homes)FACT SHEET

What is the First Home Loan Deposit Scheme?  

The First Home Loan Deposit Scheme (FHLDS) is an Australian Government initiative to support eligible first home buyers to build or purchase a new home sooner. The Scheme is administered by the National Housing Finance and Investment Corporation (NHFIC). Usually first home buyers with less than a 20 per cent deposit need to pay lenders mortgage insurance. Under the Scheme, eligible first home buyers can purchase or build a new home with a deposit of as little as 5 per cent (lenders criteria apply). This is because NHFIC guarantees to a participating lender up to 15 percent of the value of the property purchased that is financed by an eligible first home buyer’s home loan.

What is the First Home Loan Deposit Scheme (New Homes)? 

In the 2020-21 Federal Budget, the Australian Government announced an additional 10,000 FHLDS places for the 2020-21 financial year, specifically for eligible first home buyers building or purchasing new homes. These additional places are known as the First Home Loan Deposit Scheme (New Homes) or FHLDS (New Homes).

How does FHLDS (New Homes) work?

Eligible first home buyers looking to build or purchase a new home are able to apply for a loan to purchase an eligible property through a participating lender during this financial year (ending 30 June 2021). Eligible borrowers can use the guarantee in conjunction with other government programs like the First Home Super Saver Scheme, HomeBuilder grant or state and  territory First Home Owner Grants and stamp duty concessions. The guarantee is not a cash payment or a deposit for your home loan.

What types of properties are eligible?

Eligible FHLDS (New Homes) properties include:

  • newly-constructed dwellings
  • off-the-plan dwellings
  • house and land packages
  • land and a separate contract to build a new home.

A newly-constructed dwelling can also be one where a home has been substantially renovated, or knocked down and rebuilt, by the vendor – thus creating a ‘newly-constructed dwelling’.There are particular requirements which apply for each type of property. Contact a participating lender for more details.

What are the timeframes for FHLDS (New Homes)?

If you are purchasing a new home:

  • you must enter into a contract of sale to purchase your new home within 90 days of being pre-approved
  • for an off-the-plan property, the contract of sale must be dated on or after 7 October 2020. Generally, the building of your off-the-plan property must start within 6 months and finish within 24 months.
  • for a newly constructed dwelling, the dwelling must have been completed on or after 1 January2020.

If you are building a new home (either under a house and land package or as a land and separate contract to build a home):

  • you must enter into an eligible building contract within 90 days of being pre-approved; and
  • you must start building within 6 months of entering into the eligible building contract and finish building within 24 months of starting.

What property price thresholds apply for FHLDS (New Homes)?

FHLDS (New Homes) assists in the building or purchase of a new home. The value of the new home must not exceed the relevant price cap for the area in which it is located. The price caps for capital cities, large regional centres and regional areas are on the following page.

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Who is eligible for FHLDS (New Homes)?

  • Australian citizens who are at least 18 years of age. Permanent residents are not eligible.
  • Single applicants with a taxable income of up to $125,000 per annum for the previous financial year and couples with a taxable income of up to $200,000 per annum for the previous financial year. For all FHLDS (New Homes) applications made to 30 June 2021, the relevant financial year assessed will be 2019-20.
  • Couples are only eligible for FHLDS (New Homes) if they are married or in a de-facto relationship with each other. Other persons buying together, including siblings, parent/child or friends, are not eligible for FHLDS (New Homes).
  • FHLDS (New Homes) assists single (individual) applicants and couples (together) who have at least 5 per cent of the value of an eligible property saved as a deposit. If 20 per cent or more is saved, then the home loan will not be covered by FHLDS (New Homes).
  • Loans under FHLDS (New Homes) require scheduled repayments of the principal and interest of the loan for the full period of the agreement, which will need to be for a term of 30 years or less, (with limited exceptions for interest-only loans, which mainly relate to construction lending).
  • Applicants must intend to be owner-occupiers of the purchased property. Investment properties are not supported.
  • Applicants must be first home buyers who have not previously owned, or had an interest in, a property in Australia, either separately or jointly with someone else (includes residential strata and company title properties).

How to apply

Eligible first home buyers can apply for FHLDS (New Homes) through a participating lender. The full list of participating lenders is at link.

  • First home buyers are responsible for meeting all costs and repayments for the home loan associated with the guarantee.
  • All applications for the FHLDS (New Homes) need to be made directly with one of the Scheme’s participating lenders. NHFIC doesn’t accept applications directly from first home buyers.

DATA SOURCE: www.nhfic.gov.au

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Melbourne and Geelong Growth Areas Achieving a Robust Sales

The new house market continues to experience relatively buoyant purchaser sentiment, despite ongoing strict lockdown measures, with Melbourne and Geelong growth areas achieving a robust total of 1,532 lot sales in September.

Demand for new dwellings has undoubtedly benefited from the $25K Homebuilder Grant and collapse in turnover activity in the established market. Furthermore, buyer preferences are also shifting to the growth of areas, which provide the bigger hoes and greater space that is becoming increasingly desirable as more people work remotely, all at a more affordable price that is attainable for the first home buyers.

Gross sales increased by a solid of 194 lots of 14.5% from the previous month. More than half this escalation occurred in Wyndham, which clawed back market share lost to Geelong during the previous two months, after Geelong also witnessed the largest fall in monthly lot sales. Heading in September, Wyndham contained the greatest supply of titles/hear titled lots, which continue to be in high demand from purchasers in response to Homebuilder grant. Overall, 32% of total sales were titled lots, with a further 27% likely to be eligible for the Homebuilder Grant as they are expected to be titled before the end of March 2021.

However, the deterioration in economic and employment conditions has elevated price sensitivity among purchasers. This has led to an acceleration in the monthly rate of decline in Melbourne’s median price over September to 2.1% drooping to a value of $300,510. Although some of the fall was attributed to the reduction in the median lot size, the per sqm lot price was also down by 0.9% over the month. Significantly, lot pricing from both a median and per sqm perspective are now both at their lowest point since May 2019, which coincided with the trough in the previous market downturn.

The reopening of estate sales offices from October, albeit only for private appointments, is still likely to build on the momentum in sales activity in the growth areas. This has already manifest itself through improving enquiry levels during the first half October, as owner occupiers look to take advantage of the current enhanced incentives available.

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City of Logan Emerges as Global Investment Hotspot

The City of Logan is fast emerging as a global investment hotspot in south-east Queensland, buoyed by a strong economic track record, historic levels of infrastructure investment in the pipeline and business confidence on the rise.

Logan has continued to attract a number of multinational businesses and fast-growing start-ups looking to capitalise on the city’s growth potential and enviable location between Queensland’s capital, Brisbane and tourist destination the Gold Coast.

The launch of autonomous drone delivery services in Logan by Wing — a subsidiary of global technology company Alphabet — is just one of the businesses that have funnelled a total of $100 million of private investment into the city over the past 12 months.

Logan is just one of four locations in the world that now has access to Wing’s air delivery service, which flies a range of convenience items by air in just minutes.

Under the helm of chief executive James Ryan Burgess, Wing will focus their Queensland expansion plans in Logan first, with select households in the suburbs of Crestmead and Marsden already having access to the service.

Burgess said what made cities like Logan most attractive for investment was not only the demographic factors but the opportunities driven by growth.

“Logan is one of the fastest growing areas of Queensland, so that’s a great fit for us because drone delivery makes it much easier for people to get the things they need in rapidly expanding metropolises,” Burgess said.

“Logan is also a very innovative community, and the growth and excitement around the city makes it a great place for us to start our Queensland operations.”

Logan is located in the heart of south-east Queensland where around 70 per cent of the state live, and is predicted to be the second fastest growing city in this region.

In just over 20 years, Logan’s population is predicted to grow more than 50 per cent to around 548,000 residents.

This has led to an unprecedented level of infrastructure investment, with more than $18 billion of publicly funded projects under way to support the growing residential population.

 

Earlier this year, a $1.2 billion agreement — the largest of its type by any government in Australia, was signed by local authorities and private developers to build essential infrastructure in Logan’s Priority Development Areas Yarrabilba and Greater Flagstone.

This follows the completion of Transurban Queensland’s $512 million Logan Enhancement Project in August, which increased freight productivity by reducing road travel times along some of the busiest transport routes in the region.

Major infrastructure projects in the pipeline has triggered a surge in commercial activity along the Logan Motorway corridor, with large national and multinational businesses including Metcash Hardware, DHL, Queensland Logistics Service, Huhtamaki and Pinnacle Hardware setting up operations in Logan’s industrial precincts.

It’s not only the city’s efficient transport connections and affordable land driving this investment, Logan has advantages beyond its borders.

Within a 40 kilometre radius, Logan has access to a regional catchment of over 2.6 million people, a vast network of suppliers and a diverse pool of potential talent for employers to draw from.

GO1.com, the world’s largest on-boarding, compliance and professional development platform, recently relocated their headquarters from Brisbane to Logan to take advantage of this accessibility.

Co-founder Vu Tran said running a global company from Logan was a strategic decision for GO1.com and their future plans.

“Being in Logan has provided us with the opportunity and space we need to grow and also attract the talent that we need for our growing markets,” Tran said.

“Having businesses like Ikea, John Deere, Avery Dennison all based in the area means they are potential partners for us to engage with.”

GO1.com has offices in the United States, South Africa, Vietnam, United Kingdom and Malaysia, and is on track for further expansion, recently securing more than $30 million of investment led by M12, Microsoft’s venture fund.

The increasing investment in Logan is reflected in the city’s economic report card – an annual 3.9 percent increase in the Gross Regional Product in the year ending 2017-2018 and the highest percentage of jobs growth in over fifteen years.

The arrival of businesses like GO1.com and Wing could mark the beginning of an exciting chapter in the city’s development.

For Wing, the city of Logan will be their largest investment in Australia to date and will play a role in shaping what the company will do in cities around the world.

“We’re really going to be investing here in Logan, learning as much as we can from the community and over time looking to apply that to other countries and cities that we may go to,” Burgess said.

“For now, it’s all our attention on Logan and making sure we offer a great service for the community.”

 

*Note: This article is originally posted in this link.

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PROS AND CONS OF BUYING OFF THE PLAN

Many people are hesitant to “buy off the plan” because of the negative associations with this term. However, this reputation may not be really deserved. The decision whether to buy off the plan depends on personal finances, and whether you want to take a risk which may deliver fantastic returns but could just as well be a disaster.

Essentially, there are two key risks associated with buying off the plan. First, is the risk that the end product may not be high-quality and may not match your expectations. This is something that can manage by hiring a good conveyancer as well as making sure to buy from a reputable building company. We are not going to talk about this article, but rather focus on managing the second main risk of buying off the plan, that is the value of the property may change between when you sign the contract and the settlement. This could be either a good thing or a bad thing: as the value may have gone up or down.

What does “buying off the plan” means?

Essentially, it means that you are shown a property, whether a unit, commercial property, housing development, or something else that is yet to built. The timeline for construction may be 6, 12 or 18 months or more. You will receive information from the agent or developer about expected fees, yields, depreciation and other features, and will be asked to put down a deposit which secures the property at a certain price. You do not need to pay the balance until the property is built. From the developer’s perspective, this arrangement is highly advantageous as it helps them to secure
investment or financing for the development. A bank is more likely to issue financing for a project which already has commitments on a certain numbers of units. Furthermore, the more units which have been pre-committed, the better the terms of the loan.

How can I maximize this result?

If you want to be on the right side of property value exchanges, firstly you need to do due diligence. This means researching into the market, its cycles, how comparable properties are performing in the area, and so on.

It is also important not to overcommit. You should always keep the worst case scenario in mind: that the property’s value falls by 10% for example, and make sure you are covered in case this happens. Be sure to have the funds or equity available to cover this if necessary. On the other hand, if the value of the property goes up by 20 or 30%, you’ll be laughing!


What are the risks of buying off the plan?

As mentioned, one of the key risks is that the value of the property may change between contract signing and settlement. In worst cases, this could mean that your bank won’t authorize your loan for the full amount because they value the property at less than the agreed purchase price. In this situation you may be forced to make up the difference from your savings or equity, because you have already committed to pay this amount to the developer.

 

 

Why this happens?

There can be two reasons this situation may eventuate: either market changes, or faults by property valuers. In the latter case, the property valuer has simply made a bad call. The bank may be overly conservative in their valuation because they are cautious to protect their investment, or the developer may be overly optimistic on their assessment. This can particularly happen if there are not many similar properties in the area to draw comparative figures , which can make the bank’s valuers cautiously undervalue the property.

Additionally, although the property market is not often violate, it can be difficult to predict property prices in the long term. This means if you are buying 12-8 months or more in advance, the price may change in this time, and sometimes even for the worse.

Benefits of buying off the plan.

On the flipside, this means that property values can go up, too. With some research (and some luck) you can feel the benefits of a rise in property price, and made a capital gain with little deposit and no interest, which is a pretty rare achievements!

We’re always hearing about the latest “property hotspot”. This is the newest hot suburb that everyone is saying you should invest in, and seems much better than any other are. It seems like if you miss out in investing here you will be doomed to a life of poverty and become a pariah among your property investor friends! However, the reality behind property hotspots is quite different. The truth is, by the time it becomes known as a ‘hotspot’ and is mentioned in the newspaper or on TV current affairs shows, it is probably not a real hotspot anymore. Getting involved at this point doesn’t do you favors, as prices are now peak because everyone is interested in the area.

Worse still, in some cases, rent have actually stagnated even though property prices have stagnated. This means you could pay top dollar for a property without being able to recover your investment through rental income. You could increase rents, but this will likely price your property out of the local rental market.

Other factors to be cautious of include if the ‘hotspot’ has a lot of older properties which may be too valuable to knock down, but need a lot of money to bring to the standard needed to attract good tenants or resell for a decent price. Also be conscious of being drawn into an area where properties is simply out of your price range. A property hotspot may not be the right spot for you.

There are some great opportunities which will allow you to get in on the ground floor and develop the value of your portfolio. But identifying the best opportunities ahead of everyone else means you need to know what the perfect property investment for you is. This will depend on your investment strategy: renovate and flip or long term holder for example. Also what kind of property or type of tenant are you looking for? Knowing yourself as an investor will help you rise about the trends to identify the best opportunities.

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10 Reasons to Buy New

tips to buy a new
When buying something, whether a car, a household appliance, or a piece of clothing, new is generally better. A new item means better quality, more reliable, and will last longer. Does the same logic translate to property?

When buying a home, you have a lot of options to choose from – from a brand new build to an older property. There are some strong reasons to buy a new house: see the top 10 reasons below.

  1. It’s Brand New

It may seem obvious, but this is a top reason to buy a new home: it’s completely new! You’ll have the advantage of being the first people to live in it if you are buying for yourself. If buying as an investment, rental tenants also favor new homes. More modern homes are also generally better for the environment and with better features.

  1. Maintenance Costs Are Lower

Brand new properties are usually cheaper to maintain. Because they are equipped with new appliances, these are less likely to break down either. They are also generally more energy efficient compared to older homes, you will save money on your power bills too!

  1. Government Concessions and Incentives

The Australian Government offers more concessions and incentives to those buying  a new home, so you will be able to enjoy things like the home owner’s grant and stamp duty concessions. These will depend on the state, but you could end up with savings of thousands of dollar on your purchase in buy a new property. For example, you may be around $10,000 better off through the first home owner’s grant by buying something new. Check you r state’s government website for the exact figures.

tips to buy a new

  1. Greater Choice and Flexibility

When you buy a new house, you may be able to purchase off the plan. This means that you’ll have a wide range of properties to choose between, letting you choose the best properties first. You may even be able to choose specific details to suit your tastes, such as colour scheme and to upgrade to premium appliances.

  1. You’ll Have More Time

Buying a new property off the plan usually involves a longer settlement time, because a property normally takes between one and two years to build. This gives you more time to save up for a deposit and more time before you need to start making mortgage repayments. You may even find that your new property has grown in value by the settlement date, giving you an instant growth in equity.

  1. Tax Offsets

New properties have much greater depreciation savings in the first year which means you can reduce your taxable income. You can claim both building depreciation and depreciation on internal fittings and features and immediately write off some costs. Maximum tax deductions are around 2.5% over 40 years, adding up to significant savings on tax.

  1. Capital Gains

New properties represent better capital gains, because you lock in the price of the property at the moment you buy off the plan. From there, if your property goes up in value you won’t need to pay any more. With strong growth in the housing market, it is not uncommon for this growth to be significant, up to around $100,000! You can then leverage this capital growth to buy another property and continue building your real estate portfolio.

tips to buy a new house

  1. Better Security

Thanks to developments in home security, new homes tend to be safer. New houses are more likely to have things like intercom and key card access for entry to the building or car park, as well as to access the lifts. This is not only better for your or your tenant’s security, but means a smaller insurance bill.

  1. Better Rental Returns

Because tenants prefer new homes, you will not only attract better quality tenants, but you’ll be able to charge much higher rent. These kind of tenants are also more like to stay long-term, meaning less turnover in tenants, which in turn translates into fewer vacancies and better rental returns.

  1. Statutory Protections

In Australia, builders are required to take out home warranty insurance on new builds which protects the buyer if there are any major building defects. Additionally, because all fixtures and appliances are new, many of these will be covered under manufacturer’s warranties and so your on-going costs will be minimized.

 

 

 

 

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Top 10 Debt Elimination Strategies

 

debt elimination
Are you feeling the weight of a large debt? This could be a home mortgage, a person loan, credit card debit or a combination of several debts.

If you are consistently struggling to make repayments, this can have knock-on effects for all other aspects of your life. These 10 tips for debt elimination strategies will help you to free you from your debt as soon as possible.

  1. Rapid Pay Off or “Debt Avalanche”

If you have two or more debts to pay off, one good technique can be to select one and pay this off as quickly as possible, before addressing your other debts. This is called a rapid pay off or “debt avalanche”. The advantage of this approach is that you will eliminate this first debt as soon as possible, meaning that you will no longer be paying interest or fees on that debt. Once the first debt is paid off, you can turn your attention to other debts and apply the same technique.

Carefully budget your income and expenditure and put all available money towards your debt avalanche. If you receive any extra cash, put this toward the debt also.

In order to choose which debt you will pay first through rapid pay off, here is a simple 6 step process to use the ‘debt avalanche’ technique:

1) List out all your debts: who is owed and for what.

2) Include how much is owed for each debt and the total balance.

3) Record the minimum monthly repayments on each.

4) Take the amount owed on each debt and divide this by the minimum monthly repayment.

5) List the interest rate on each debt.

6) Decide which debt to pay off first. The debt which has the lowest number from this calculation will be the one which is most greatly impacting your cash flow in the short term, and so the one which you want to pay off first through your debt avalanche. This will generally by the debt with the highest interest rates, but not always.

  1. Debt Consolidation

Consolidating your debts together can be a great way to reduce interest and fees, and will save you money in the long run while you pay off your debts. In practice, debt consolidation means taking out a bigger loan and paying off your smaller loans. Usually, it is best practice to increase the amount of the one of your debts which has the lowest interest rate and lowest monthly repayments, which is most often your home loan.

Once you have increased your home loan and used this amount to pay off smaller, higher interest debts with higher monthly repayments your debt will all be under one loan with a single, lower monthly repayment. You will also be accruing less interest in total each month, meaning more of your repayments are going toward paying off the principle of the loan rather than simply paying interest.

To increase your home loan you can either refinance your mortgage with your current lender, or seek refinancing with another institution. Other things to keep in mind when refinancing are to try to find an option where you make fortnightly rather than monthly repayments, and that the bank or mortgage lender makes calculations on your loan daily rather than monthly – both these things can represent significant savings. And, of course, make sure that you are meeting your repayments and do not let small debts accumulate again!

debt agreement

  1.  Line-of-credit

Another strategy you could use to consolidate and ultimately eliminate your debt is through a line-of-credit loan, though this is a somewhat aggressive and even risky strategy. Under a line-of-credit loan, you use your house as security against a large loan from a bank or financial institution, who will offer you a more favorable interest rate compared to a credit card or personal loan, because they have your house as a guarantee. This way, the interest rate will be approximately the same as a home loan, so this can be a good alternative to refinancing your mortgage should that not be a viable option.

In a line-of-credit loan, also known as a “revolving line of credit”, the lender will usually lend up to 80% of the value of your house and as you be able to access extra money (“credit”) as you need it, up to the maximum amount of credit allowed. This means even as you pay down your debt, you can draw extra credit if you need it. The bank will calculate interest on a daily basis based on your loan balance. Therefore, the lower you keep the balance overall even if you need to occasionally borrow more to meet expenses, the less interest you will pay overall.

debt elimination

  1. Draw Passive Income from Equity

If you have a large asset like a house, whatever percentage of this you own outright is equity which you have. You can therefore use this equity to buy further assets which generate a positive cash flow overall, after the costs of loans have been considered. These are known as “higher income yielding assets” and generate extra income which you can then use to pay down your debts.

This can be any kind of investment, but you need to do careful research to make sure that this investment will definitely deliver a positive cash flow overall. Additionally, you need to consider the time and effort necessary to manage this investment and whether that is justified by the income it generates.

  1. When All Else Fails

If your financial situation is too severe, or has progressed too far beyond these debt consolidation strategies, the next steps may be more around making arrangements with your creditors to manage your debt rather than simply looking to reduce it over time. These next strategies are the “last resort” techniques which should be applied when all else fails.

  1. Informal Agreement

Your creditors may also agree to enter an informal agreement or informal arrangement to give you a little more time. This agreement is non-legally binding but your creditors allow you extra time to pay your debt before they proceed with legal action. Creditors will usually agree to this in specific circumstances, including genuine financial hardship, and generally all of your creditors will need to agree or otherwise it may jeopardize the overall agreement.

  1. Debt Agreement

You may be able to come to an agreement with your creditors which will make your debt more manageable, for example through changing or delaying the amounts of regular repayments. These agreements are legally binding to all parties and may involve you putting up some kind of guarantee, for example an arrangement where the creditor will be allowed to seize your house if repayments are not made.

These kinds of agreements have very specific criteria, so careful investigation is needed. For example, you cannot set up a debt agreement if you have previously been bankrupt. It is also worth noting that a debt agreement may affect your credit rating, and failure to follow through on the agreement (as in make the agreed repayments) can officially make you bankrupt.

  1. Part IX and X Arrangements

Part IX and Part X arrangements are an alternative to bankruptcy, although these are only an option if all creditors agree (or at least a majority of creditors holding 75% of the dollar value of your debts). The advantage of Part IX and X arrangements is that you may still be able to keep some of your assets and even continue to operate your business.

Under these arrangements, a proposal is drawn up and accepted by a majority of creditors, with an administrator appointed to manage the arrangement. Under Part X this must be a registered trustee. In Part IX, the administration may be a friend or associate, but there is a limit on your assets and debts.

debt elimination

  1. Bankruptcy

Bankruptcy is certainly something which should only be considered as a last resort, and has many long-term impacts. Once all alternatives have been investigated and exhausted, however, bankruptcy may be your only remaining option. Bankruptcy can occur either voluntary (that is if you declare yourself bankrupt), or through a creditor or creditors’ action.

Once you have been declared bankrupt, any remaining unsecured creditors are no longer able to take action against you in order to satisfy their debt, though they may lodge claims in the bankruptcy. However, you will then be considered bankrupt for at least 3 years, and in some cases 5 or 8 years. During this time you will be limited in terms of what assets you can own, and your credit rating will be severely damaged. You are also still liable to pay Government debts, legal fines, on-going expenses such as utilities bills and maintenance payments.

  1. How To Prevent Crippling Debt

Rather than resorting to bankruptcy or Part IX or X measures, it is much better to avoid uncontrollable of crippling financial debt in the first place. Seeking advice from a financial advisor on debt management and debt elimination as early as possible, even at the time of taking out the loan, will help to do this. A financial advisor will also be able to help you decide which of the strategies mentioned here are best for your personal situation. Above all, the best thing you can do is address your debt opening and directly, rather than ignoring it or avoiding the issue.

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Best 10 Tips on Growth Acceleration

tips for growth acceleration

  1. What do you want?

There are two significant categories of property strategies: growth producing a strategy and income generating strategy.

You can use either of the strategies depending on what you are after and what you want to gain from your property investments. There is only, but a thin line between growth properties and income properties, mainly because purchasing a property can earn you both an extraordinary growth and an enormous income.

There are many strategies that property investors can use. The most important thing is to understand how each plan works, their advantages and disadvantages, the one that is ideal for you and the one that supports your goals and the direction you are moving to.

You should note that there are no specific rules to this; there is no right or wrong way to make property investments. It all boils down to your present, where you see yourself tomorrow and the time, effort, and risk you are willing to take before you achieve your aim.

Property is one of the best rewarding investment strategies. Even when you seem to make a wrong investment decision, if you still hang on for a while, you will hardly lose your money. Ensure that any decision you are making as regards property investments fit into your portfolio, and it will not expose you to high risk.

  1. Getting yourself informed

“Knowledge,” they say, “is power.” You won’t be exposed to many risks when you educate yourself. If you know much about a topic irrespective of the field, industry, or sector, you have low chances of facing threats in that area. When you get yourself informed about things that have to do with real estate and its management, you are less likely to be faced with risks such as a property not being zoned for immediate use, being stuck with GST bills or even a bad lease.

With more knowledge, you have more confidence at your disposal. It confers on you, not just the ability to ask more questions but also to ask the appropriate questions. In that way, you get the required answers that would help you make wise decisions.

  1. Analysis of portfolio

Nothing much seems to be said about this aspect of investing yet, and it is an important one. It doesn’t matter the sort of deal you come across, if it isn’t suitable for your portfolio, then it is not the right one for you. This doesn’t mean it is not the right one for another person either.

As you gain more knowledge and become more proficient in property investment, you get to a certain level where you have developed your investment intuitions to the point that you can take investment decisions taking into consideration what best suits your personality, your timeframe, your goals, your financial level and then the personal commitment you have towards possessing wealth.

tips for growth acceleration

  1. Getting started and knowing your starting point

Most Australians address the issue of money management before they even start investing. The most crucial money management skills people need to learn are record keeping, budgeting, and also keeping account of the inflow and outflow of your money.

You should take note of your assets and liabilities and know your financial capability. What do you gain on a monthly, bi-weekly, and weekly basis? What exactly does your income look like? You should know all that. This still boils down to record keeping. With record keeping, you would be able to give a more accurate assessment of your financial status.

  1. The concept of ‘good debt’ and ‘bad debt.’

Good debts are usually tax deductible as they are acquired to buy assets that generate more income than the asset itself costs. It is the debt between you and the structures you purchased; you are both the banker and the borrower. This is the right way of protecting your assets as your structure will get paid before any other potential litigant or a creditor that is not secured.

Bad debt, just like its name sounds is the sort of debt that leaves your poor. With this sort of debt, you get to pay huge interests e.g., the store card debt and the credit card debt. It would help if you had these debts eliminated as soon as you can.

  1. What is the purchasing power of your money?

To attain success, you have to ask yourself the appropriate questions. The question, “how much can your money buy?” is an excellent place to start. It would be best if you always had in mind that in property investments, your starting capital should be able to cover your deposits (from 5% to 30%, ideally 20%) and the property cost (that includes the price of forming the structure, legal fees, stamp duty). It should also cover the cost of whatever it is you want to do on that property to achieve your desired purpose for purchasing it in the first place e.g., loss of extending and renovating it.

If you understand this, you are one step ahead of being a successful investor as this will go a long way to determine how much you can afford to pay for a property and also where you need to search for the property within this price range.

tips for growth acceleration

  1. How far are you willing to go to get the right deal?

Price should be the first factor you should consider when investing. The next element in line to that is how far you are willing to go to get exactly what fits your price range. If you do not have the right answer to this, then, it is high time you have a rethink on your strategy, motivation, and determination. Sometimes you might have to drive a long distance to get a deal. Some are willing to do everything necessary to start up their property investment. A family purchased a $79,000 property after six hours drive. With this investment, they were able to buy their PPR and are now into multi-million dollar deals. How far are you willing to go?

  1. What is your timeline for sale?

When choosing the strategy to use for your property investment, time is a factor that should not be overlooked. You should know that some plans would require more labor and input from you. Hence, if you do not have much time at your disposal, you need to go for a strategy that won’t take much of your time or require much input from you.

  1. Make investments that would help strengthen your weakness

As an investor, you should already know your weak points so that the next property deal you would be striking would be one that reinforces your investment weaknesses.

Lets’ take, for instance, you have equity that has low serviceability, you would need a deal that focuses more on cash flow. This is to help increase your income and thus, serviceability from the angle of the bank. This implies that banks will favour you more when you come seeking for a loan for your next property.

In the other hand, if your investment is already on high cash flow like a business but low on equity then your next deal should be geared at one that gains ownership or value so that when you want to take a loan from the bank for your next sale. You will have enough security to cover up for it.

tips for growth acceleration

  1. Do a review of where you started when you purchase/sell a property

Your financial status changes with each property you buy or sell. This means that each time you have a new starting point hence, the need for you to make a new assessment of what next your portfolio needs, your original price point, your new timeframe and every other detail we pointed out above. This is an ongoing project for you, and you need to make adjustments continuously; it makes it more fun.

 

 

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Top 10 Questions to Ask an Accountant

 

tips to ask an accountant

As you move towards financial security, whether through investing in property or other methods, it becomes increasing important to seek financial advice. Having regular, professional advice about your finances is essential, and for this reason it is important to hire a great accountant. Here are our top 10 tips for questions to ask your accountant.

  1. Are you electronic or paper-based? Some accountants prefer to work electronically, through emails and online or virtual documents, whereas others deal in physical paperwork. Depending on your preference, you’ll want to find someone who works the same way you do.
  2. Do you have your own investment properties? Accountants who have their own investment properties have an intimate personal knowledge of the deductions, risks and advantages of investing in property. They don’t need to own their own property to have this knowledge, of course, but it certainly helps.
  3. How big is your accountancy practice? What is your role? There is not necessarily a right or wrong answer to this, as it is largely personal preference. You may prefer to work with a bigger firm and the resources that involves, or you could look for a sole practitioner or a smaller firm where your accountant is the partner, so you will receive personal service and attention. Either way, you should find this out in advance to make the right decision.

    tips to ask an accountant

  4. What services does your practice offer? The scope and breadth of services accountants offer can vary widely, so this will depend on what you’re looking for. You may only need assistance with your end of year tax return, or may want year-round advice and consultations.
  5. Do I like this person? This of course is a question for yourself rather than your accountant, but it is an important one. Your relationship with your accountant is important, so you need to make sure you click with them on a personal level. Likewise, they need to have a thorough understanding of your business, goals and vision in order to give you the best advice.
  6. How do you charge for your services? Accountants may charge an hourly rate, or they may charge on the basis of the tasks to be completed. Usually the latter is the better option from the client’s perspective.

    tips to ask an accountant

  7. Do you regularly undertake professional training? Because relevant laws and regulations are constantly changing, you should look for an accountant who keeps their knowledge up to date through regularly attending courses and seminars.
  8. What are the scope of your services? Some accountants will purely focus on subjects relevant to tax, whereas others can give you advice on a range of issues from insurance, wills and even budgeting.You may or may not want this, but it’s good to find out.
  9. Can you help with a Self Managed Super Fund? If you are looking to invest in a property with a SMSF, or may wish to in the future, you should check whether the accountant can help you with this (or if they agree it is a good idea).
  10. What licenses to you have? Check what degree and subsequent qualifications they have, such as a CPA or similar. You can also verify this online at www.tpb.gov.au.