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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.

 

 

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10 Incredible Types of Cash Cows that will Bring You Extra Cash

extra income
Do you want to make life more comfortable by having lucrative cash cows? Yes, you can. A cash cow is a business or venture that you can begin with no much investment. It may be slow, but it inevitably brings much profit in the long run. Cash cows bring much income than what is required in starting or used in maintaining the venture, which is ideal for business-starters.

They include:

  1. Multies

As they are popularly known, multies are the ability to get various streams of income that covers all commercial areas from the residential to industrial-aspect to regular involvement. One fantastic thing with cash cows is how the right knowledge and constant practices can make it quite easy, thereby resulting in lucrative streams of money for you.

When starting multiple streams of income, you have to consider the procedure, protocols involved, which includes getting in touch with your local authorities if need be. One crucial way to be active with multies is to ensure its cash flow can adequately sort out debt. For instance, if a landlord or a landowner decides to build another house, it should be for a short-term purchase or hire purpose. This is to give room for constant reselling of home instead of just getting incoming cash.

Resale of buildings will help cover the debt of other valuable properties, thereby keeping debt on land assets low. So, whenever you want to purchase land, and you build two houses, ensure you put one of your homes for sale, thereby paying your debt for the first house and still keep the profit.

  1. One- Person Student Housing

Rather than have different rooms in your home without being useful, it is wise to turn those number of rooms into assets to make money for you. There are many people in need of accommodation out there.

There are cases whereby the returns increase, especially in dealing with property management cost for the family. Save more and earn more by giving out those rooms for rent. Moreover, do it with legal backings and cautious practices.

  1. Side income from Granny flats

You can make extra money by renting out your granny flat or other small space/apartment on your property which you don’t need, and profiting from using space you would not be otherwise using.

The Government of New South Wales States has given investors the privilege to make use of old-looking houses also know as Granny flats for revenue purposes. The Government of The Queensland is also involved in this unique idea to harness every available human-made resources as well as for a steady flow of income for the government to meet the basic needs of the people which shelter is one of the essential requirements.

cash cows, extra income

  1. Trading/Commercial Cash cows

These are ventures done regularly for profit making, so whether they are full commercial or partly investments, these type of businesses come with high risk as there are other issues involved such as hygiene regulation, safety rules, and the likes. The chances are always on the owner and not the customers. For you to benefit from this type, for instance, if you are to build a house, it’s best to rely on an already made structure so that the risks are minimized.

  1. Car-Parks

This type of cash cow is easy to maintain if situated at a commercial zone. Most developers do not see the need to structure a property used commercially to save cost. For starters, ensure the car-parks are in areas where they can be utilized consistently.

  1. Warehousing

Daily, businesses require a storage facility to keep their goods in stock. Any location of choice can be used for warehouse construction, but it is recommended to build a warehouse or a storage facility in areas where they are most needed. Like the seaports, markets. To get a flow of income regularly.

cash cows, extra income

  1. Hire Accommodation/motel/Housing

Hire Accommodation/motel/Housing is also one of the oldest yet effective cash cows, that brings in constant cash flows. It varies from the almost high-class style of accommodation that has every supply needed in the home to the low class. Some may not have a cleaner in view most times when looking for shelter. If you are to venture in this type of business, you can get an experienced agent manager who will require a commission for each work carried out by them.

Handling this type of business also requires getting a website to stand out as a professional to corporate bodies, communities, and local government areas. This will ensure your business sounds legit and convincing to be patronized. If getting a website is time-consuming for you, you can place adverts on other related housing websites like stayz.com. They charge a token for each rental.

Moreover, adding cleaning charges and other additional charges will not affect your profits.

 

cash cows, extra income

  1. Lease

This type of business is for risk-takers and for those who can quickly strike a profitable deal with clients. Peradventure you fall in this category, and then take the lucrative opportunity in this business. This business is all about getting a property at a more affordable lease price and reselling the same property at a higher price. This is mostly used for commercial purposes and in places with massive lands. Some areas like Australia may not be fit for this type of business. Nonetheless, it can bring an increased source of income when done commercially.

  1. Wrapping Means

Wrapping is a case where an asset is bought at the market’s lower end to another person who may not be able to pay off alone except through financial institute support, then they later payback the loan with an agreed interest rate. This allows competent buyers who are not financially stable to buy an asset with the help of financial institutions as the bank.

It also implies that suitable buyers (business starters, sole proprietors, divorcees) are not only judged by their financial pocket alone but by their commitments.

  1. Industry Specific Investment

Industry investment is one of the cash cows to go into. However, some investors who have seen the light of profitable cash flow only restrict their reach to some specifications such as student’s accommodation, retirement funds. For you to enjoy the benefit of investing in the industry area, commercial areas that involve natural resources industries such as steel industries, quarries mines, transportation services, and much more should be harnessed.

The chances of getting more customers and sales will be slim when you go for properties/investment with restricted usage like the pensioner funding. Another challenge with this venture is the difficulty of lending finances. As this is a known cash cow that can be restricted if not adequately handled. Diligence is needed in this type of business to get your profit.

Cash cows are long- term businesses that can make your liability become more of an asset to you and bring more income along the way. This also indicates that for every business to thrive, dedication and commitment is required, whichever activity you choose to go into, ensure you are knowledgeable about the company to avoid unnecessary risks and losses in your business. It is also pertinent to know the technical know-how of a business. Learn from others who have been in your choice of company to emerge the best in your choice of cash cow ventures.

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10 Things All First Home Buyers Should Know

tips for first home buyers

Buying your first home can be an overwhelming process, with so much information to take in and processes. Here are the top 10 things all first home buyers should know.

  1. Study The House Buying Process

The first thing you need to make sure you know is how the fundamentals of the house buying process works. Research how the transaction works, what clauses are common in contracts, and what conditions generally apply, such as a cooling off period. Knowing how the property transaction is supposed to work will put you in a stronger position to be able to navigate your purchase, know what questions to ask, and what may raise alarm bells.

  1. Financing

The next thing to make sure you have in order is your financing. Before you can put an offer in on a house, you will need to have financing confirmed. This means taling to a financial planner or your accountant to know how much you can afford to borrow, and getting pre-approval on your loan from a bank or financial institution. Having pre-approval is not necessarily necessary in order to put an offer in on a property, but it can give you the edge over other offers if the property is popular. You should also seek advice from a financial planner as to whether the particular property fits within the best strategy for you. They may also have other advice, such as whether you may be eligible to apply for the first home owner’s grant.

tips for first home buyers

  1. Have a Large Deposit

As a first home buyer, it is important to have a large deposit. Having a healthy deposit means that you will pay less interest on the loan overall, you will have more equity available to you in the future should you need it, and you avoid costs like mortgage insurance.

  1. Go Through the Contract with a Fine-Toothed Comb

Yes, you will have lawyers and agents in place to handle all the details, but it is important that you are familiar with all the small details in your purchase contract. In particular, you want to make sure that there are “get-out” clauses written into the contract. This means that if something unexpected comes up during the purchase of the property, such as the discovery of major structural or pest issues with the house, you will be protected.

  1. Look Into The FHOG

As a first home buyer, you should look into the FHOG (first home owner’s grant) to see if you are eligible, and if this would be a good option for you. The availability of this grant varies depending on which state you are living in, but you may be eligible for $10,000 – $15,000 to help you to buy your first home. Criteria also differs between states, but generally these grants are available for those who are building a new home or buying an existing one for the first time, and are planning on living in it for at least the first 12 months.

financing

  1. Seriously Consider Your Budget

Be cautious about the amount of money you are looking to borrow. Just because a bank is willing to lend you a certain amount of money, doesn’t mean you should borrow all of it. Taking out a large mortgage can put you under a significant amount of financial stress. Seek financial advice and carefully consider your budget to make sure you are not overstretching yourself by borrowing too much.

  1. Hire a Buyer’s Agent

Although it is not necessary to hire a buyer’s agent in order to buy a house, this can be highly beneficial. We are very familiar with seller’s agents, who are hired by vendors to sell a property, but buyer’s agents have the mandate to look out for the needs of a buyer.

  1. See Your Property as an Investment

Even if you are buying a house as a PPR (“principal place of residence”, that is, you are planning to live in it), this doesn’t mean it can’t be an investment. Even your PPR can be an effective investment property for you if you buy in an area which has strong potential for capital growth. You can then leverage this investment in the future to buy additional investment properties, or invest in a larger PPR.

tips for first home buyers

  1. Look to The Future

Buying a house is a big decision, so you want to make sure you make the right choice to set yourself up for the future. You should see the decision as a step towards your next purchase. Consult with a financial planner who will be able to tell you if you should focus more on cash flow, or on building up equity.

  1. Look Into “Sinking Funds”

As a first home buyer with low equity, sinking funds could be a great option to increase your equity and improve your financial position. For example, by buying into strata units you could use sinking fund money (assuming the body corporate agrees) to improve the value of the property through renovations and so on. This will then increase the equity of your property which you can leverage for future purchases.

 

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Top 10 Tips on Insurance

tips on real estate insurance

1. Insurance for Landlords

It is a straightforward task to ascertain whether you need landlord insurance or not. Every landlord should have Landlord insurance. Many of the landlords spend much money on things that are not relevant; hence; they should spend time to peruse the insurance policy. Without doubt, a majority of the Landlords are usually reluctant to acquire the landlord policy, and they do soon after they have lost much money. It is very pertinent to carry out a thorough check and investigation on your tenants to ensure that your property is in protected. You should note that accident is inevitable and even the best tenants can spoil your property by accident or by mistake. Your landlord insurance policy should suit you, and you should spend ample time to research about it before taking decisions.

  1. Insurance for construction One of the paramount things for people handling construction work is construction insurance. Construction insurance is applicable for all forms of, including renovations, need buildings and extensions. Construction insurance is a very dicey insurance sector, and the provisions are not the same for different insurance companies. You have to be well vested with the required information to ascertain whether you have the coverage for unforeseen occurrences like storm, fire, and theft.
  2. Insurance for public liability

The focus of Public liability insurance is on personal injury and damage of property. The coverage is not the same for different companies, and this underlines the reasons why you should read the policy carefully. It is incumbent on all businesses and traders to have this insurance and not meant for property owners only. The fact is that you are liable for the risks involved in third-party injuries, strangers, or unauthorized/authorized users of your property.

insurance on construction

 

  1. Insurance for buildings

This one is straightforward to understand, and it is straight forward. It covers the cost of replacement and renovations for buildings that are damaged by storm, landslide, or fire. In this case, the insurers will pay you based on their valuation for the rebuilding of the house. If you are residing in areas that are prone to natural occurrences, then you will pay more for insurance.

  1. Insurance for contractors

It would be best if you were watchful of the contractors that you hire for your job. They should be licensed, and you have to request to glance through their insurance policy. Glancing through it would not be beneficial in anywhere. You have to take your time to peruse it to decipher the details of the insurance policies i.e., things that are covered and not included. It is pertinent for all contractors to have insurance coverage in:

Public liability: This offers protection against strangers and inevitable occurrences such as death or accidents, financial losses, and other substantial damages.

Professional indemnity: protection is offered for your actions and professional performance. This provision offers you protection against legal cases and related issues.

Product liability: Your goods may cause injury, but is provision will protect you against such claims.

  1. What is the right time to end the insurance policy

During the ends of every insurance policy, liability is transferred, and this is applicable in virtually all the states within Western Australia as an exception. Assuming you have some clauses in your contract which offers the leeway for you to exceed the agreement, then you can trigger the terms to end the contract or insurance when you insure some losses or liabilities. There is no way out for you once your deal finalizes without conditions; hence; you have to ensure that your insurances are well defined.

life insurance

  1. Life Insurance

Death is an inevitable end, and it can occur at any time. This insurance coverage over protection against the burden left for the loved ones. No one would love his loved ones to suffer or struggle financially, so it is pertinent to provide insurance coverage for mortgages, income, and every other investment.

  1. Insurance for income protection

We are all mortals and can be prone to unforeseen circumstances that might incur heavy financial losses. If you experience this, then you may not be able to meet your daily needs. With income protection insurance, you will be able to secure yourself during difficult times. The protection will provide you with 75% of your average earnings. As usual, you have to access the provisions of the policy to ascertain whether it is suitable for you.

  1. Assess the compensation policy for your employee

As an employer, it is incumbent on your provide the needed insurance for your workers, especially in cases when they are injured. You have to provide compensation for both full-time workers and part-time workers. Most people are ignorant of the fact that compensation should be given to part-time workers. This type of payment is known as Home worker’s compensation instance. Part-time workers are workers who come to work when the need arises such as gardeners, home tutors, baby sitters, etc.

  1. Insurance for contents

It is very imperative to inform your insurance company for upgrading your insurance coverage if you experience changes such as relocation and renovation. Failure to do so may be compromising to your insurance policy, and you may no longer have access to the coverage. In cases such as these, you have to upgrade your insurance policy to renovation insurance.

 

 

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Top 10 Tips on What to Inquire from Insurance Professionals

insurance professionals

  1. When did you start practicing insurance? How many years of experience do you have?

You have to hire an experienced insurance professional who has in-depth knowledge of the field. The person should be able to provide you with highly profitable deals.

  1. Do you have the ability to compare between fixed interest rates and the interest rates that vary? Moreover, then offer me some advice on the ideal option that I should choose?

They should be very pragmatic, and you have to ensure that the option offered to you ideal and should provide immense rewards. It would be best if you asked them to prove to you that the choice is perfect.

  1. Do you possess the license of Australian financial services and RG 146 complaint?

You must be very sure that the insurance broker that you hire possesses all the necessary licenses and they should all be current.

insurance professionals

 

  1. Which one are you? Insurance broker or insurance advisor?

Insurance advisors are workers for single companies, and they will provide their clients with limited products and services as provided by their company. Insurance brokers have the opportunity to access different policies since they have a connection to many insurance firms, they can work with more than one firm, and it is incumbent on them to ensure that they offer the required services to their clients.

  1. There are many insurance firms, specify the one you are working for?

You should not rely on one company. You have to sample other instance companies and go through their insurance policies. Insurance broking depends on commission; hence, you should go for the best deal.

  1. How long will I have to wait for income protection insurance? Please specify the waiting period?

It would help if you inquired about the period you will wait before the implementation of the insurance. Waiting period occurs if you have an injury at work or elsewhere and you are not able to work. During this period, you will have to spend from your savings, and the cost of insurance increases as the waiting periods reduces.

insurance professionals

  1. Have in-depth ideas of the insurance coverage

It is essential to carry out a hypothesis of the insurance coverage. The insurance coverage is vast and contains some unforeseen situations. You have to know about them the ones that are not covered and the ones that are covered by the insurance policies. One of such instances is the storm damage insurance or the flood damage insurance. Some of these unfortunate situations may not be covered. You have to be aware of the situation and why you may not get a guarantee. By taking this action, you will not be knowledgeable and have foreknowledge of your benefits.

  1. Carefully peruse the contents of the insurance policy;

A large chunk of people amounting to 95% does not scan the content of the insurance policy. It is quite apparent that you will not enjoy reading it, but it is a sure way to understand the routes to bankruptcy or wealth in the future. Read in the insurance policy will offer you the ability to decipher when things go wrong, things that are covered, and the ones that are not covered by the system.

  1. Will I be paid from my super funds? What are the processes involved?

It is imperative for your insurance broker to keep you abreast with the current Superfund law. These laws are, and you have to update yourself with payment information from your super fund. It is an arduous but possible task not minding the fact that you are less than 65 years of age.

insurance professionals

  1. Meet a financial adviser for advice Another essential step is for you to consult your financial adviser for information on financially related issues. They will help you on the best strategy for planning for every type of insurance. They will advise you on the risks, the things that could ruin you, and how to prevent it. You have to find out about these pertinent things before meeting the insurance broker.
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Top 10 Questions to Ask a Real Estate Agent

 

questions for real estate agents

Whether you are buying or selling, finding the right real estate agent is critical. Here are our top 10 tips for questions to ask potential real estate agents to make sure you make the right decision.

  1. How experienced are you?
    It is important to ask the agent how many years they have been in the industry to get an idea of how experienced they are. Of course, experience does not necessarily translate into skills and expertise, and less experienced agents can also have a lot to offer. However, experience is definitely be an asset.
  2. What licenses to you have?
    As a first step, check that the agent has the necessary licenses and certifications.
  3. What is your sales track record?
    This will depend on the current real estate market, so it is important to compare sales records with other agents you are considering. The agent’s sales record is one of the strongest indicators of their skills as a salesperson. You should also ask what percentage of sales are through auction, compared to prior to auction and general sales.

    questions for real estate agents

  4. What’s your office’s auction clearance rate?
    It is important to know how effective the agency in general is at selling at auction, and this question will give you can idea of this.
  1. What is the industry average days on the market in the area?
    This is important information to have also, as this will help you to interpret the agent’s own average days on the market, as well as get a picture of how the market is performing at present. The best way to get a picture which is as accurate as possible is to ask this question to multiple agents and compare responses.
  2. How many days are your properties on the market?
    Another strong indicator of an agent’s skill is the number of days their properties stay on the market. Of course every property is different so this will not necessarily be the same case for yours, but it is worth knowing the average number of days their properties stay on the market.

    questions for real estate agents

  3. What is the industry auction clearance rate? Equally, it is important to know what the average auction clearance rate currently is across the industry, as this can vary significantly depending on market conditions. Having this information will not only give you an idea of an agent’s success compared to the average, but also whether it is a good time to take your property to auction.
  4. Are You Able to Provide References?
    It is very common to ask for references from previous clients in order to talk to them and ask them about their experience. Ask for the agents most recent three vendors, to make sure you get up to date reference information. If you are looking to sell your property at auction, it may be a good idea to specifically ask for references from auction vendors.
  1. Can You Tell Me About the Auctioneer?
    Most agents will hire an auctioneer to carry out the auction. It is a good idea to get information on the auctioneer they are planning to use and if possible attend one of their auctions before you make a final decision to see the quality of their performance.
  1. What Do You Offer That Other Agents Don’t?
    Ask them what they can give you which other agents cannot. A good agent should be able to tell you why you should hire them over another agent.
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10 Mistakes to Avoid on Your First Real Estate Investment

Mistake #1: Bad Financing

Bad financing can be one of the most lethal mistakes possible. I have personally seen more real estate investors lose money or go out of business from bad financing than from any other mistake.

What is bad financing? For me, it includes a combination of the following:

  1. High interest rate
  2. Adjustable interest rate
  3. High monthly payment
  4. Balloon payment
  5. Personal recourse

Most residential bank mortgages at least save you from the first four mistakes because the interest rates are low, fixed for 30 years, with amortizing payments, and there are no balloons. But they almost always require personal recourse, meaning you personally guarantee the loan with your other assets and future earnings. This is probably a reasonable trade-off.

Many commercial, portfolio, hard money, and private lenders, however, do not meet any of these criteria. And that could be a problem, especially on your first deal.

If you borrow at 12 percent interest with a large monthly payment, a balloon due in one to three years, and full personal recourse for the loan, you are likely taking too much risk.

Why? Because the property will likely have negative cash flow with the high interest rate. A balloon note means you will have to refinance or sell in a very short period of time. As many learned in the 2008 credit crisis, trying to refinance when credit dries up is very difficult even with perfect credit and good income. And personal recourse means that if anything goes bad and your lender loses money, they could chase you around and take your other assets in order to collect.

I have always used a lot of private and seller financing for my real estate deals, and I keep this list of financing mistakes in mind. For example, I might trade off a little higher interest rate and a larger down payment in exchange for a longer loan term and no personal recourse.

Mistake #2: Bad Location

Real estate value always begins with location. The people and businesses who will rent or buy from you begin with location, and then they evaluate other criteria like the lot and the house.

Because it’s so important, you should study the best and the worst locations in your area before buying. There are investors who make money in bad locations, but it’s a challenging game that beginners should probably avoid.

I bought a lower-priced single family house once at a below market price with excellent seller financing terms. But the location was awful. I could not consistently attract good tenants because the neighbors were not pleasant (or safe) to live around.

On the other hand, I have bought properties in good locations that I made mistakes on, like paying a little too high of a price. The good location helped to bail me out of some of those mistakes.

Mistake #3: Misjudging Resale or Rent Value

I would argue that our number one job as investors is to understand how our end customers (renters and buyers) make buying decisions and then to translate that to a value. If we can’t determine the full value potential, we will have a hard time making a confident purchase offer that earns us a profit.

This job is important. But it’s not easy. It’s a skill that you must commit to learn and then continue to refine every day for the rest of your investment career.

On your first deal, it’s likely you are not yet an expert on value, so there are a few things you can do to help yourself:

  • Reduce your target market to a relatively small, manageable area.
  • Study all of the transactions in your market daily using tools. For me, this is like the daily weight training of real estate that keeps me fit and competitive.
  • Hire professionals for assistance. For resale value find a very competent real estate agent and/or appraiser. For rental values find property managers with multiple units in your area.
  • Take courses on valuation at your local Associate of Realtors or other continuing education school.

Mistake #4: Underestimating Repair Costs

It is inevitable that you will underestimate repair costs at some point. But you want to avoid enormous cost overruns that could cause you to run out of cash or face other problems.

To avoid large mistakes, learn a good repair estimating system.

Also be sure to get help from other more knowledgeable investors or contractors. Don’t be afraid to pay these people for their time and knowledge.

You can meet these people by:

  • Attending local meetups
  • Attending local real estate club meetings
  • Driving neighborhoods looking for remodel projects
  • Asking on the  Forums

Mistake #5: Running Out of Cash

Your investment properties are like your race car. Cash is like your car’s fuel. When out of fuel, even the most powerful race car in the world sits still. If you run out of cash, even the best investment property will hurt your wealth building.

So you want to avoid running low or running out of cash.

This usually happens for a couple of reasons:

  1. Underestimating repair costs (see mistake #3 above)
  2. Underestimating future capital expenses on a rental property

Capital expenses are big ticket items like a roof or a heating-air system replacement. If these costs hit you unexpectedly, it can become a big problem.

 Mistake #6: Letting Emotions Drive Your Decisions

This is a huge mistake for newbies. And it’s understandable. I mean it IS an exciting chase to look for your first deal.

But you have to balance your enthusiasm with cold, hard, and objective analysis.

I love enthusiasm. It’s critical as an entrepreneur because it helps you push ahead through the many obstacles you will face.

But I have also learned to never make big financial decisions with emotion alone. I use a process of analysis that filters each of my deals. I also run every deal by someone else, which typically means my business partner but sometimes includes other mentors and advisers.

My process begins with basic criteria, including general locations, neighborhoods, housing types, construction quality, etc. This helps me to filter down the enormous number of properties out there.

Then I use a deal analysis process to analyze the numbers. Here is my basic go or no-go system for a deal.

 Mistake #7: Choosing the Wrong Real Estate Strategy

Real estate investing has MANY strategies. And it’s easy to get overwhelmed or waste time chasing the wrong strategy.

Here’s a tip: You won’t find a perfect strategy. But you can find one that pretty well suits your unique strengths, your short-term needs, and your long-term goals.

So, instead of borrowing the perfect strategy for someone else, think hard about what you really want and which real estate strategy will get you there.

Mistake #8: Choosing Bad Contractors

Finding contractors who will do good work, finish up on time, clean-up after themselves, and charge reasonable prices is harder than finding buried treasure on a beach. Yet the people who do work on your fix-flip or rental deal will make or break its success.

Mistake #9: Not Using Your Due Diligence Period

Some experienced investors make offers with fast closings, in as-is condition, and with no due diligence period. This may help them get a lower price, but for your first deal this is probably not the best route to go.

Instead, include a short but reasonable due diligence period that allows you to get out of the purchase contract if you find a problem.

Here are a few of the important things I usually do during due diligence:

  • Obtain a very good professional third party property inspection
  • Repair estimates (see mistake #3 above)
  • Evaluate zoning and local ordinances (for example, the college town where I invest has a law that you can’t rent to more than two students in a residential zoning district)
  • Get a professional third party opinion of value and rental comps

Basically, you want to double check all of the key assumptions you used to make your offer. If you find that you made a bad assumption, you may need to renegotiate or walk from the deal.

Mistake #10: Not Learning From Your Mistakes

You have just read 9 mistakes to avoid, and I could probably tell you another 20. But no matter what you learn, you will still make mistakes. I guarantee it.

Conclusion

Real estate is an entrepreneurial venture. We entrepreneurs shoot for the stars, but we also take risks that could turn out badly. This can be a difficult pill to swallow on your first deal. But risk doesn’t have to be a bad word. I see it as a barrier to entry. It means that the less committed, pretender-investors don’t bother. They drop out when it gets too tough.

The successful real estate entrepreneurs aren’t perfect. They have scars to prove all of their past mistakes. But they learn to avoid the fatal mistakes that would knock them out of the game.  And they learn to always keep moving forward.

Forward movement. That’s what entrepreneurship is all about.