Right now you may be on the fence as to whether to move out solo or with another individual. Consider these options for the latter.

Tenants in Common

Ideal for individuals who don’t want equal ownership, ‘Tenants in Common’ depend upon the agreed shares of each party which may be something like 70/30. This also means that if one party dies, rather than their interest passing on to the other tenant, it goes on to the individual’s estate and will.

Joint Tenants

The most common form of ownership, particularly for husbands and wives is ‘Joint Tenants’. Essentially what this arrangement entails is that both parties have equal shares. Alternatively to Tenants in Common, if one party passes away, all the shares are transferred to the other individual through rights of survivorship.

Although this is universally the most common option, it is not always the best. For example, in the situation where one party is earning remarkably more than the other, an arrangement such as Tenants in Common may be more appropriate in certain situations which will be discussed below.

These options are polar opposites which can make it hard to decide, however, fortunately there can be some flexibility in certain cases. There are different situations that can arise which would combine both. An example would be if a third party was involved that desired a smaller share, whilst the first two parties would share the greater half. This would result in a Tenants in Common and Joint Tenants relationship.

How to Determine What Option to go With

Whether you go with Joint Tenants, Tenants in Common or a combination will solely depend on your circumstances and personality. There are certain factors and situations that call for one option over the other. The below points will provide you with some insight as to what option may be more appropriate for you depending on your conditions.

Joint Tenant

• Both parties are in equal or similar income brackets.
• Ideal for married couples or business partners.
• Continuity – you desire to keep ownership of the property for whatever means if the other party dies.
• Financial stability – will not go into turmoil if other party becomes deceased.

Tenants in Common

• You earn significantly more or less than the other party.
• You do not want full ownership if the other party passes away.
• Financially cautious (lower income party).

Both options are advantageous depending on your situation. The final decision would have to be made between the two main parties or more, to come to a conclusion if you’re set about moving out with someone. Ideally if there are more parties involved, a combination may be the best option.

Although Joint Tenant has historically been seen as the default option in most cases, this is beginning to change as people have begun to act more consciously with their capital in property purchasing. At the end of the day, it will come down to your research as well as your knowledge to choose the option that’s best suited for your circumstance.

Want some help deciding which option is best for you? We can help! Contact us today.

Fortunately for you, this article will outline some of the top methods of increasing your rental yield so that you don’t go missing out on the potential earnings that countless of other property owners do.

Furnishing

It is common knowledge that the more stylish and well managed a property is, the more it will rent for. Unfortunately, many landlords make the mistake of seeing a property as it is rather than what it could be and be worth.

Although it may not be needed or even worth the investment, sometimes it can pay to offer your investment property as already furnished. This will appeal to those tenants who need to move somewhere quickly, and will also mean you can charge a little more rent than if it were just the empty property.

Spare bedroom

This applies mainly for a property that has a garage or spare space that could be much better utilised as a new bedroom or study. Transforming a space to a new room could yield an enormous increase on your rental yield, especially considering the minimal work that is required seeing as it’s just a redressing.

Parking

Depending on the tenant and location, adding a spare off-street parking spot can be the deciding factor for someone contemplating rent. If your ideal renter is travelling around a lot and not using public transport, this add on should be heavily considered.

Adding off-street parking is not separate from the property, this means that your total property value will rise as a result of this added luxury.

Pro pets

Inspect the location where your property is, is it a pet safe area? Or more business orientated? What type of tenants will be interested in your property? If the answers point towards a pro pet demographic, then you ideally want to allow it. This may or may not apply to you, but if it does, you should know that you are disregarding much of your target market if you disallow pets.

Proximity

This applies if you have not already yet purchased your property to rent out, or are looking to relocate. There can be much said about location that you will find in just about any real estate manual or guide, but if there is one niche to target in relation to it, students would be it.

Choosing an area close to where students study will in itself give you a lot of potential tenants, and it also means you won’t have to spend a lot of money on the touch ups that normal tenants would require.

Applying even one or two of these tips will certainly increase your property rental yield. Although they are all practical, ensure you study the circumstance in regards to the tenants, location and so on before making any decisions.

More than anything, conduct in-depth research on each of the 5 ways before taking action, remember this article acts as a general guide on the methods rather than a step by step on executing them. Contact us today to discuss this further.

Although unfortunate, it is a fact that frivolous lawsuits are an issue and people are taking advantage of our legal system. Wealth can be acquired throughout an entire lifetime, and taken away by one superficial claim. This article will go about explaining the different ways you can protect yourself from this fact so that you never have to suffer from a frivolous creditor.

Individual ownership of assets

The best way to shoot yourself in the foot in terms of asset protection is to own investment properties in your own name. In the case of being sued you are at risk of losing everything under your name.

Many people would argue the tax benefits and cost effectiveness you would receive by using your own name, and they would be right, but the argument for the potential loss is a much better one if your focus is on protection.

Company structure

An alternative to individual ownership is using a company structure, which is characterised by being a separate legal entity from the owner. In the case of asset protection, this is a much safer and wiser choice as the risk is transferred to the shareholders in the company.

The issue with this structure is that if the individual happens to own all the shares in the company, much of the asset protection benefits you would receive from this form of ownership would dissipate.

Trust fund

Typically, property investments owned in a generic trust are the way to go over the above examples. The benefit of this is clear, the individual does not own the asset, but rather the trust does. The individual however, does control it.

During the situation of a lawsuit, a person with a trust does not bear any potential loss or risk that a company structure and individual ownership do. The only caveat is that you must know what trust is right for you for many reasons including tax effectiveness; whether you’re a business or on your own will have a lot to do with this.

What about insurance?

Many individuals mistake asset protection for insurance and make the fatal mistake of choosing one over the other. The truth is, both supplement each other and are mandatory. Having insurance provides many benefits towards asset protection including legal fee assistance, funds to settle lawsuits and so on.

Now that you’re aware of the main forms of ownership in relation to protecting your assets, you can judge your situation and make an informed decision. Contact us to discuss your investment options.

Units

Compared to houses, units tend to be smaller abodes, with smaller rooms and less private open space. They may be stand alone (i.e. detached), or they may have common walls with abutting dwellings (i.e. semi-detached), and may also have shared space for driveways and parking.

Once the domain of the pensioner or downsizer, units (aka apartments, condos, and plexes) are now popular to the point of becoming mainstream for these three reasons:

1. Affordability

In general, in any given suburb, a unit will be cheaper than a house. This will be because it is a smaller sized building with more compact bedrooms and living areas, but more importantly, because it has less land.

As mentioned, having to put up with small used to be seen as a compromise. Not so much anymore. Smaller now means less cost (i.e. rates, utilities, etc.) and less effort to maintain (i.e. cleaning, garden, repairs, etc.).

2. Convenience

While apartment living has always been a necessity in population dense cities like London and New York, and in places like Europe, Australia was urbanised on the back of a “house in the suburbs on a quarter acre”, and a commute (usually via public transport) to the city for work.

Yet, as travel times increased, and as the amenities in city areas improved, the CBD area has morphed from a place to work and be entertained, to a place to live and work and be entertained. For some, the convenience of walking to the office and access to superior amenities such as restaurants, entertainment, transport, etc. have outstripped the benefits of a traditional house in the ‘burbs and a long commute on a congested freeway to work.

Furthermore, as mentioned, while seen as odd by past generations of Australians, unit living is the norm in many Asian and European countries where space is in short supply. Without any prejudice, immigrants see nothing unusual about living in the same type of (compact) accommodation as is the norm in their country of origin.

3. Yield

For investors, compared to houses, units generally provide a better income return. That is, despite needing to accept a lower rent compared to what could be achieved owning a house, investors are more than compensated with a cheaper purchase price so that when the numbers are crunched, it is usual for a unit to have a higher percentage gross return (i.e. annual rent divided by purchase price) than a nearby house.

Houses

To qualify as a house, the dwelling normally has to be on its own title and have no shared or common area, including walls, driveways, etc. Houses are usually larger than units – both in respect to room size and the amount of private open space.

As mentioned, for many generations past and present, the Great Aussie Dream was to own your own house, which was typically on a substantial parcel of land (such as the classic quarter acre which is a little over 1,000 square metres). While land sizes have diminished (most new houses today come on land parcels of 500 square metres, or less), houses remain the pinnacle of home ownership for those who like their space, are raising a family, and/or who prefer not to be living a wall away (i.e. a few metres) from their neighbours.

Which Is The Better Investment?

Consider this conundrum: you can either buy an older 2-bedroom house for $500,000 in suburb Y, or a new 3-bedroom unit in the same suburb. Which should you choose?

As we flesh out an answer, here’s a general investing principle to remember:

You are better off purchasing the worst house in the best suburb you can afford, than the best house in the worst suburb you can bear living in.

Have you heard the saying “Land appreciates while houses depreciate”? It’s true. What makes a dwelling more valuable is not the bricks and sticks it is made from, which will deteriorate over time and require maintenance, but rather its land size and proximity to appealing amenities. This is sometimes paraphrased as “location, location, location”, but that is only partly true. For land to be valuable it must be usable and it must be scarce; land that is not usable or scarce is unlikely to be a good investment.

The principle mentioned above captures the reality that a bad house on good land will be a better investment than a good house on bad land.

Another general principle to remember is:

Buy the best-worst house you can afford rather than the worst-best unit.

In other words, dollar-for-dollar you are better off buying a run down house in your chosen location than a spruced up unit. Why? Because over time the land will become more valuable (as it comes more scarce) whereas the unit will depreciate in appeal as it suffers wear and tear from use.

It is true that your rental yield will probably be lower for the house, but whatever you miss out on in income should be well and truly made up for in extra capital appreciation over time.

These two points made, you may be faced with limited deposit capital and/or borrowing ability. If so, then a unit can still be a smart investment if it helps you get in the property market, rather than having to watch on the sidelines as property prices increase faster than your ability to save.

If you are considering purchasing a unit, then here are four recommendations to remember:

Buy old, not new. Older units are usually bigger, and you won’t pay a premium for shiny and new which is only temporary anyway.

Don’t get attached. The less attached a unit is, the better. If possible, avoid common walls abutting living areas.

Less is better. The fewer units on (or in) the block, the better. The more dwellings there are, the less scarcity there is, and the more cramped the living conditions, and the less land that would be “yours”.

Aim high, or low, not middle. You are better off with a ground floor unit (for convenience), or a high floor unit (for the view), rather than being in the middle with the masses.

To conclude, data that tracks rental yields and movements in median dwelling prices over time indicates that while units deliver a better rental yield than houses, houses outperform in terms of capital appreciation. Given Australia is largely a growth (rather than income) property market, you’re better off with a house than a unit, and better off with a unit than nothing at all.

Source:

https://www.propertyinvesting.com/units-houses-make-better-investments/

Despite the impact of the “Rail Fail’’ crisis in disrupting the region’s train services, and concern about growing road gridlock, the Queensland capital has outranked Sydney, Canberra, Melbourne, and Perth.

The Sustainable Cities Mobility Index, compiled by global design and consultancy firm Arcadis, puts Brisbane at number 48 overall in an assessment of 100 of the world’s growing centres.

“These results are very strong for Brisbane,’’ Dr Louisa Carter, Arcadis city executive for southeast Queensland, said.

“Brisbane is the lifestyle capital of Australia and we can now also boast we are also the sustainable transport capital.”

Dr Carter said the result made the city more competitive in attracting economic investment and knowledge workers.

The report, which looks at public transport, active travel such as cycling and road transport, rated Brisbane well on maintaining its quality of life.

And Dr Carter said we were on the threshold of “a one in a 100 year investment cycle” with projects including Cross River Rail, the Brisbane Metro network and European Train Control System to improve rail efficiency. “These are very exciting times,” she said.

The report added that Brisbane could learn from Amsterdam where the average commute had been cut to less than half an hour by prioritising cycling, creating capacity on trains and trams, and using tunnels for road and rail projects.

The index, which ranks each city on 23 measurements across social, environmental and economic indicators, said the use of public transport, cycling and walking was low by international standards.

Dr Carter said that might reflect commuter’s experiences but the best way to improve public transport was to use it more and attract more investment in it.

A lack of underground metro systems and dependence on private vehicles kept Australian cities around the middle of the rankings or lower, the report said.

Hong Kong was number one worldwide. The report said its “well-organised, modern and efficiently funded” metro system encouraged mobility, “creating economic opportunity and enriching the lives of citizens, businesses and tourists”.

It was followed by Zurich and Paris, with European cities dominating the top 20.

Image and original source: http://www.couriermail.com.au/news/queensland/study-finds-brisbane-has-australias-best-transport-system/news-story/cc63622bbaecfe6164b6e1418a6a5e8a

The most efficient way to claim these tax benefits is through a depreciation schedule; a report undertaken by a surveyor, usually when the property is purchased. The surveyor is responsible for providing a physical analysis of a property, clearly identifying materials used throughout the building (including fittings and flooring), internal and external wall treatments and appliances. An estimated value is placed against these items and depreciation is calculated based on the age and value of the property. Most properties regardless of their age can offer investors substantial tax benefits through obtaining this schedule.

Although depreciation can be an annual tax deduction, only one depreciation schedule is required for the property rather than a new schedule each year. However, it should be updated on an annual basis should the property need major repairs or undergo renovation. With Australians spending over $100 million every week on renovations, undertaking a tax depreciation report has never been so important.

There are certain assets within a building that generally have a higher depreciation value, including timber floorboards, air conditioning and solar power systems. Other items which are more commonly claimed for depreciation include hot water heaters, appliances and bathroom accessories, as well as smoke alarms and exhaust fans.

With all of these assets in mind, the cumulative deduction over a five year period can save the investor tens of thousands of dollars. However, to qualify for these tax benefits, it is suggested investors complete a depreciation report for the property as near as to the date of purchase as possible. If you don’t obtain a tax depreciation report then you cannot claim for these substantial tax benefits.

For advice on your investment property and how to claim depreciation, contact CPS Finance today.

It’s important not to confuse gentrification with urban renewal; a process of clearing and rebuilding or renovating properties in urban slums. Although both have a positive effect on investment properties, gentrification results from a shift in cultural trends and public opinions of an area (as opposed to the physical changes only) providing more powerful, long term benefits for the area.

What to look for in a gentrified area.

If we look at Sydney, we can see a rich history of gentrification within the past 20 years – for example in Balmain and Kings Cross. These areas were once rife with high crime, low economic status, high unemployment rates and dilapidated housing. Now, they represent two of the most sought out suburbs in Sydney for renters, investors and homebuyers for their appealing and luxurious lifestyle, convenient CBD location, and of course, priceless harbour views. Both of these areas experienced the displacement of the original residents (due to increase of demand, and therefore price), ultimately introducing a new, more affluent demographic to the area; a hallmark of gentrification.

Gentrification does not discriminate based solely on location. Leichhardt is a prime example of where culture was the key factor in its dynamic social shift that helped shape and influence the suburb. Italians originally migrated to Leichhardt in the 1920s, with cultural entrenchment rapidly increasing after WWII through the introduction of restaurants, cafes and local businesses. The modern day example of this cultural gentrification is Harris Park. Harris Park is the epicentre of the Indian community within Australia. It has become well known for its authentic cuisine offering and grocery stores. For an investor, it would be wise to look at this community and analyse the ongoing potential as the Indian population within Australia continues to grow.

Good or bad? Or both?

As with most major societal transformations, gentrification has its pros and cons – attracting both critics and enthusiasts. On one hand, gentrification paves the way for regeneration which in turn increases property prices and overall value. But the flip side of this usually means the original character can be lost; milk bars turn into cafes and local pubs turn into cocktail bars. Now, not all of this is bad if this suits your tastes or lifestyle. But for those who have resided in the area for a long period of time, it’s not uncommon to become emotionally attached to the area’s original character.

What does this mean for property investors?

When an investor is searching for a new property, affordability and potential capital growth are two factors which are considered. Investing in an area that could be gentrified can deliver on both of these items, but the trick is finding these hot spots at the right time. The key to taking advantage of these areas is to look to past trends to predict the future. For instance, we know that higher crime suburbs, if in a good location, may eventually be gentrified. Blacktown is a recent example of this, whereby positive change in the area is seeing investor curiosity and interest rise. Dulwich Hill is an area where the close CBD proximity and untapped social roots has seen businesses and investors take an active interest in the suburb.

Researching local government initiatives, community intentions, location and access to existing or future infrastructure will reveal the area’s potential for gentrification. It’s important to remember to analyse cultural shifts or behaviour in the area (or surrounding areas), so as to not mistake this shift for urban renewal – which still has the investor’s interests at heart, but can be more limiting in terms of long term capital growth.

To seek advice from a knowledgeable property expert about your next property investment, contact CPS Property today.

Four things to consider when seeking out your first property purchase

Location, location, location.

No surprises that the location of your property will play a big part in its long-term success. Research suburbs and locations with signs of strong growth in infrastructure, minimal unemployment, access to public transport and high capital gains.

Find the right price

Once you have found a suburb or area you are keen to invest in, investigate the median house price for the area. Whether the property is renovated or not does not matter at this stage, however if there is room for renovation or improvement it means there is greater scope to add value to the property. As a rule of thumb, it is suggested to consider properties within 10% of the median price which is a good way to know you’re not over-investing.

Future potential

When purchasing your first home, consider your situation in five years time, and how the property will appeal to as many people as possible – including buyers and tenants. Placing emphasis on the long-term investment potential will help you to decide whether to retain the property as a rental, or sell and reinvest. Once you’ve determined these goals, certain features will become more important. For instance, access to public transport (namely trains) will be an attractive asset for renters, but might deter some buyers due to noise pollution.

Get the right finance

Speaking to a financial professional will help ensure that your loan is tailored to your long-term property goals and objectives. Understanding your cash flow, ongoing property costs and potential future rental yield will prove critical information when you decide to tenant or reinvest the property. Laying down the correct financial foundations at the beginning of your investment career will prove to be extremely beneficial in the future.

Like with any investment opportunity, it is advised to set out future goals and objectives before determining how to achieve these. Planning is key to ensure that in the future you can maximise value from your investment.

Contact CPS Property to discuss investment advice today.

Here are our tips for property investors to ride out any significant market changes.

Recalibrate your thinking

Firstly, it’s important not to panic but rather be patient, recalibrate your thinking and reset your expectations. Revisit your financial strategies and projections. Once you have a clearer indication of your overall investment status and performance, it becomes easier to make decisions to achieve or maintain growth.

Invest in Property Management

Savvy property investors invest in a property manager to maintain their assets long term. In an ever changing environment, a good property manager can ensure an investor is achieving the best rental yield. Property managers secure quality tenants, coordinate rental reviews and manage maintenance and repairs, ultimately helping drive value for your property portfolio.

Secure long term, quality tenants

When tenants sign longer term leases, investors have a more secure income stream with fewer gaps in their rental income. Good property managers will build rapport and an ongoing professional relationship with your tenants, earning mutual respect and trust for both parties which reduces the risk of any issues arising. As an investor, it’s important to know your property is being looked after and that repairs, maintenance and any structural or physical issues are minimised by sourcing low-risk tenants.

Look outside of Sydney and Melbourne

For investors who have been comfortable and successful in the Sydney and Melbourne markets for numerous years, now is the time to invest elsewhere. There are thriving markets around the country which have proven to be stable and reliable all while maintaining growth and return on investment (ROI). Brisbane is a great example of a smart investment choice, with the largest rise in dwelling value during the December quarter. Furthermore, should the market burst the investment landscape will be exposed to new and emerging areas to invest, creating new opportunities.

Have an appreciation for depreciation

The ATO allows investors to claim the decline in value of a property by way of a tax deduction. This deduction varies depending on the age and value of the building, but usually sits between 2.5% and 4%. As an investor, being able to claim these tax benefits is highly valuable as it can inject thousands of dollars into your tax return. Depreciation can be claimed on both positively and negatively geared investment properties. In fact, if you own a negatively geared property, you can claim up to 60% of your investment (the property purchase price) with the help of depreciation and other appropriate tax benefits.

Review your property portfolio

If you have multiple investment properties, now is the time to review their performance in terms of capital growth, rental yield, costs and consider selling any non-performing assets. From here you can reinvest into a higher yield or higher growth property to generate a more profitable long-term asset.

While property investors may not be able to expect the same capital growth and low interest rates in the years ahead, the market will turn around again as it always does. To discuss your investment opportunities and how to maintain your asset growth, contact CPS Property today.

According to the CoreLogic RP Data Home Value Index, dwelling values were absolutely flat across the combined capitals during December, with negative movements in Sydney, Adelaide and Canberra being offset by a rise in dwelling values across the remaining five capital cities. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra. The remaining capitals saw a rise in dwelling values, led by a 2.3% bounce in Perth values and a 1.0% rise in Melbourne values over the month.

Index results as at December 31, 2015

After dwelling values had been broadly rising since June 2012, the December quarter results revealed a 1.4% fall in dwelling values across the combined capitals, the largest quarter on quarter fall since December 2011. Six of the eight capital cities recorded a negative result over the December quarter, with weaker conditions in Sydney and Melbourne acting as the greatest drag on capital city performance, according to CoreLogic RP Data head of research Tim Lawless.

The largest quarterly fall was recorded in Sydney, where dwelling values were down 2.3% over the final three months of the year, followed by Melbourne, where dwelling values were 1.9% lower. The only capital cities to show a rise in dwelling values over the December quarter were Brisbane (+1.3%) and Adelaide (+0.6%).

This was in contrast to the first three quarters of 2015, where capital city dwelling values rose by 9.3%, largely driven by a 14.1% surge in Sydney values and a 13.3% increase in Melbourne.  In stark contrast, the final quarter of 2015 showed Sydney as the weakest performer of any capital city, with dwelling values down by -2.3% while Melbourne recorded the second weakest result of -1.9%.

The complete 2015 calendar year results reveal a 7.8% increase in capital city dwelling values which is the lowest rate of capital gain over a calendar year since 2012 when values slipped 0.4% lower over the full year. Highlighting the diversity in the capital city housing markets, dwelling values fell across four of the eight capitals in the 2015 calendar year. The largest of these falls were recorded in Perth, down by 3.7%, and Darwin down by 3.6%. Hobart and Adelaide also showed subtle falls of 0.7% and 0.1%.

Despite the recent weakening of housing market conditions in Sydney and Melbourne, the two largest capital city housing markets still recorded much stronger annual gains than all other capital cities,  11.5% in Sydney and 11.2% in Melbourne. Dwelling values in Brisbane and Canberra were up a more sustainable 4.1% over the year.

Mr Lawless said, “The wealth created from housing in Sydney and Melbourne has been exceptional over the past twelve months.”

“In dollar terms, Sydney home owners have seen approximately $82,000 added to their wealth thanks to the strong capital gains over the year while home owners in Melbourne have seen the value of their dwelling grow by approximately $60,400. Brisbane home owners are $18,560 better off while Canberra owners have seen the value of their homes increase by approximately $21,900.”

“Home owners in the remaining capital cities have seen some erosion of their wealth via falls in the value of their dwelling. The largest losses have occurred in Perth where the average dwelling is now worth approximately $19,970 less than it was 12 months ago, while Darwin home owners have seen the value of their home shrink by a similar $18,150. The annual decline has been milder in Adelaide and Hobart, however dwelling values are still $515 lower in Adelaide over the year and down $2,430 in Hobart.”

“The slowdown in housing market conditions across Sydney and Melbourne in the last half of 2015 is being driven by a range of factors that can best be described as both organic and externally influenced. Organic market conditions have been derived from affordability pressures, rental yield compression and cyclical factors, while factors from external influences largely stem from a change in the regulatory framework introduced by APRA which has made it more expensive and difficult for investors to access housing finance. Added to this is higher mortgage rates and more restrictive credit policies and loan servicing requirements.”

Source: CoreLogic 

Looking to secure your next investment? Brisbane might be the opportunity you’ve been waiting for. Having solidified its reputation as a reliable and stable investment market, all while maintaining growth and ROI, Brisbane is a smart choice for local and international investors currently.

Contact CPS Property today to discuss your investment opportunities.