So for the average Joe who is not the next Mark Zuckerberg or young millionaire, pay attention. The 4 wealth fundamentals you’re about to read are not only practical and realistic, but integral to your success.

Goal

When it comes to building wealth, always start with the end in mind. By knowing your goal, all your other decisions and actions will be better guided towards its attainment. Although it’s the most simple, it is also fundamental.

Ask yourself – How do I want to live after I retire? Comfortable? Lavishly? The answer will help find the solution to the next question which is – How much would I need in my retirement for this lifestyle?

Once you know this information, you need to create a flexible plan that can be adjusted as time goes by.

Income

At the foundation of your wealth building strategy will be your start up capital, which usually derives from the income you create.

There are a lot of factors that you need to take into consideration when it comes to income. One would be whether you know if your present income is going to be stable, increasing or decreasing in the future based on your circumstances and career. The answer will dictate how freely you’re able to spend or how cautious you should be with the money you’re currently making.

Aside from living expenses and leisure, your income should be set aside for a smart and proactive savings plan. This is a factor that is highly recommended especially if you’re young, as the earlier you begin the longer you have to build this up.

Investing

Only after your savings plan is set up and active, should you start investing. Every other factor in building wealth is based on surviving. The reason why investing is so important is because it’s geared towards thriving and having a great future instead of just preparing for a “rainy day”.

In many cases, time is the most important factor in investing, oftentimes more important than the amount you invest due to compound interest. The most important component is that you start as soon as possible, even if it’s a dollar that you can build on over time.

Expenses

Without a doubt, expenses are the one factor that if you get wrong, can cause failure for the rest of the fundamentals. The fact is, if you’re spending more than you’re earning, not only are you losing money, but you cannot save, invest or create a prosperous future for yourself.

If this is the case for you currently, feel good that you came across this article. Have a look at your weekly expenses, what are the musts and what are the purchases that don’t really matter?

This could be as simple as cups of coffee, excessive shopping or anything that you feel you do to an excess. Although cutting these are small at first sight, in hindsight you will find they build up to massive savings and will tip you over the scale to more income than expenses.

There are many more facets and factors to learn of course, but these tips will give you a basis of understanding on what to initially pay attention to. Wealth is a major component in our lives, so making these fundamentals a focus will be one of the most important decisions you make. Contact us today to discuss further. 

Although it seems like much of the work is already finished if a property is tenanted, this can very often be a negative. If you are in this situation or it relates to you, carefully study this article so that you can be certain that the tenanted property you’re looking at is right for you.

The Potential Pitfalls of Diving Straight in

Before assuming the best and going for the purchase, detailed research must be conducted as to why the property is still tenanted and is it for the wrong reasons.

The most common pitfall is that the tenants are substandard. Often-times this is the very reason as to why the property is up for sale in the first place.

Management disagreement can sometimes be the issue, especially when the current tenant has unrealistic expectations. A very real and potential scenario could be that you’re forced to put a property manager in charge, and that shift of responsibility and routine for the current tenant causes issues.

Often-times it is not advised to investors if a tenant is short term or not. Many of the times when they are, the rental price is elevated which at first sight will create an attractive deal for the investor. When price is the deciding factor,  you will be in for a shock when it comes time for the tenant to leave. Not only do you need to find a replacement, but one at standard market price.

In rare cases, tenants can be quite opportunistic or even greedy, for lack of a better word. This can be common when the investor is a beginner. As soon as you take ownership, there may be unrealistic material demands made upon you for improvements that the other vendor did not consider.

These are just some of the potential pitfalls that could arise. Although there are more,  the foundation you need is research. As an investor looking into a tenanted property, you must be willing to put in the time to find out as much as possible to be certain that the property is tenanted for the right reasons.

The Importance of the Lease Agreement

So you’re now certain that the property is tenanted and none of the above or other issues are apparent. There are certain variables that you will need to look at to avoid any silly mistakes, and these involve the tenants.

A common thought that ponders around new investors heads is whether they’re eligible to kick out tenants or not. This would especially be critical to know if they fall into one of the negative categories mentioned above. This brings us onto the lease.

Is the lease fixed term or periodical?

A fixed term is exactly what it sounds like. For whatever period the contract is set (usually 6-12 months), it cannot be terminated unless the tenant and new owner make an agreement. Alternatively, a periodical lease is the opposite. A monthly contract is usually the case in which the tenant can be granted 60 days notice to vacate.

Aside from the above, it is critical you know other details about the lease so that you’re in control. What is the amount of bond held? Are inspections held, and how often? How much does the tenant currently pay in his or her current contract? All these questions can be answered in the agreement or with a bit of investigation and communication.

As always and as mentioned with tenanted properties, research comes first. Use this information as a guideline as to what to look out for immediately, with every different circumstance there may be a different factor involved with the tenant. It’s worth going to the trouble of finding out as much as possible before making an investment that could be potentially detrimental. Contact us to research your next investment.

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.

Most people don’t begin investing with enough to cover the entire cost of a property. And chances are, you don’t have a tidy million sitting idly in your bank account just waiting for the right property to pop up.

So, what are your options then? A little thing called leverage.

What is leverage and how does it work?

Leveraging is an investment strategy, whereby you use borrowed money to finance an investment that you couldn’t afford to buy without those borrowed funds, and hope that it increases in value over time so that your return on investment (ROI) also increases.

Although some investors see it as risky, leveraging property allows you to purchase more property, thus increasing the size of your portfolio, than you would otherwise be able to afford.

When you invest in property, a financial lender will require you to put in, or pay, an amount of money towards the investment, but this amount is usually just a fraction of the overall value of the investment. Then, as the investment increases in value over time, so does your future ROI.

Let’s look at a common property scenario. If an investment property is $400,000 and you need to put down 10% for a deposit ($40,000), then you’re using a relatively small percentage of your own money to finance this purchase, with the majority of funds being borrowed. Assuming this investment has everything going for it and appreciates by 5% per year, your net worth from this one investment would grow to $420,000 in just one year.

If you then compare this to an unleveraged investment, where a $40,000 property is purchased outright (and if you find a $40,000 property, let us know!), and the same 5% rate of appreciation occurs over one year, your net worth would be $42,000.

A difference of $18,000!

Now figure out those figures over multiple years, and it’s easy to see why so many investors choose to leveraging property to build their portfolios and net worth.

The benefits of leveraging property

Using the $40,000 as an example again, if you placed that money into a term deposit at a bank, you could feel safe and secure knowing exactly what your interest rate is and what you will earn from this investment. This is a hassle free investment option with virtually zero risk involved.

However, to really maximise your wealth, you need to be able to take risks. As risky as leveraging may seem, the financial rewards can also be far greater than other investment strategies.

The main benefit of leveraging property is that it frees up your capital because you only have to front a fraction of the property value. This also means that you have the potential to have more than one investment going simultaneously.

You also get to enter into these investments faster than if you had to save for the entire property, meaning you can get into the property market at today’s prices, but benefit from them in years to come.

The risks of leveraging property

Just as leveraging property can increase your wealth, it also has the potential to decrease it. If your investment property drops in value, that extends to your overall net worth. If property prices fall low enough, you can even end up owing more to your loan than what the property is worth! Choosing the right property in the right area is a good way to minimise this risk.

In an ideal world

It’s important that you have a clear plan for your investment strategy. Leveraging property is quite common, especially when you consider that most people require a mortgage to purchase a home. To get the most out of your leveraged investment strategy, ensure that you have a financial buffer in place for unexpected costs, and consider buying in metro areas where property demand is higher.

Ideally, you would buy below market value and only properties with a strong yield so that they are also paying themselves off.

To learn more about how you can make leverage work for you, contact us today.

This is why more and more people are choosing to invest in property, as a way to build up their wealth in preparation for retirement.

Building up an investment portfolio over a number of years will benefit you in the long run, and is especially beneficial for retirees, as property can provide an ongoing income. Many people have the plan or idea to do this – and just haven’t yet got started.

So, how can you retire with investment property and use it as your long term income? There are two main ways; capital gains and rental income.

Capital gains

Capital gains is where the value of your property increases above what you paid for it. The additional value can then be accessed by you – by either selling the property or by loaning money against the equity in the property.

With properties tending to increase in value over time, you can draw on the equity in your existing properties and re-invest. Each year you would need to take a new equity loan for the year ahead. This is a great way to grow your portfolio quickly as you can take advantage of the equity in your properties. By the time you retire you have a valuable property portfolio.
While many investors begin investing for capital gains when they are starting out, often they will try to turn these properties into positive cash flow properties, from where they are earning a rental income, so that they can use that money to live on instead.

Rental income

By buying positive cash flow properties, or by paying off debts so there is no more owing on a property, it effectively becomes an income generator for you. Positive cash flow properties are those that generate more rental income than outgoing expenses.

This method may be seen as more conservative, but if you can buy a positive cash flow property, then it will generate income from day one. You can use this to help pay down the debt, or to fund further properties. Over time, the rental income will increase while the debt decreases, until eventually the debt is gone and the property is fully paid off. This then means that all of that rental income is accessible to you, for your lifestyle and retirement.

Some people with many properties, even sell a few to pay off the debts of the remaining properties in order to achieve this outcome faster.

The secret to any property investment strategy is to start early. Investment properties, purchased as part of your long-term retirement strategy, can be a greatly rewarding experience, financially and otherwise.

It’s also good to keep in mind that it doesn’t matter how many properties you own – what does matter is the value of your asset base, along with how hard you can get your money to work for you.

If you want to get started securing your future, talk to us at CPS Finance today.

Why is the rental market softening?

Investors have experienced unprecedented capital growth in their properties and have been paying historically low interest rates all while rents have been on the rise for a five year period. We’re now likely to see the power shift back to tenants for the next two to three years as a surge of new property hits the market.

Changes to the rental market may have repercussions for older stock, particularly as tenants seek out newer properties with modern facilities and amenities. This in turn can make it more difficult to lease older properties, particularly if there is little pricing differentiation.

There are four main factors that will force the rental market to soften, including:

1. Lowest wages growth on record
2. Relatively high levels of housing investment following record highs
3. Historically high levels of new construction
4. Slowing of population growth, creating less overall demand for housing.

The combination of these factors means that landlords have little scope to increase rents in the short term, and in most cases may recommend the same or less rent for the upcoming period. The prime objective during this time will be to minimise tenancy vacancy.

How to manage a rent reduction

While ebbs and flows are a natural part of the property market cycle, it’s important to be prepared and have a plan in place for a cooling market.

Here are five tips to help manage a rent reduction.

1. Look long term. While cash flow is important and rental income is required to assist with debts, the main objective for investment property is to obtain strong capital growth. Generally speaking, a period of a softening rental market will not have a long term impact on the value of the property. It’s important to remember this if faced with a rental reduction situation.
2. Be realistic. It would be an opportunity wasted to lose a tenant and risk having vacancy in your property for the sake of pricing your property too high. The market may continue to decline for a period of time, and it is best to be realistic from the beginning, rather than issuing a series of price amendments.
3. Focus on the positives. When interest rates have dropped, it is likely you could be paying less on your loan – ultimately reducing the potential it could have on your overall cash flow.
4. Get advice. Property managers are your resource to understanding how the current market factors could affect your property. Set aside some time to meet with your property manager to put a plan in place should a rent reduction be required.
5. Don’t freak out. Although it may not be common or normal practice, rental reductions are part of the property cycle and shouldn’t cause panic among investors.

If you would like to discuss your investment options, contact CPS Property today.

As a landlord it’s imperative to understand both landlord and tenant rights and responsibilities. Knowing the process and protocol in your state will see you navigate your way around legislation correctly, ultimately staying away from tribunals and court mediation.

Here are our tips on how landlords can make sure they and their tenants are meeting their obligations.

Get Educated

In many cases, tenants are diligent with knowing their rights – especially if they’ve rented previously – so it’s important landlords become familiar with the Residential Tenancy Act. The Act aims to respect the rights and obligations of landlords and tenants, covering rents, rental bonds and other matters relating to residential tenancy agreements. There is also an abundance of resources available online for free to the public on government websites, Domain or realestate.com.au. The more knowledge you have, the less likely you are to fall foul of the law and end up with unwanted court fines.

Follow the Process

A landlord should always ensure two things at the beginning of a lease; a bond and a condition report. A bond acts as a security deposit to cover any costs of damages or potentially unpaid rent during the tenancy. The bond, however, must be forwarded to the residential tenancies bond authority who place the funds in a trust. Normally worth four weeks rent, the bond cannot increase during the tenancy.

Once the tenancy has been terminated, the landlord can claim the bond if the property is not in the same condition it was at the beginning of the lease (this does not include general wear and tear). If the landlord has no objections to the condition of the property, the tenant receives the full amount back upon moving out of the premises. On the other hand, the landlord can claim damages caused by the tenants, cleaning costs, outstanding bills or unpaid rent which is paid for out of the bond. If there is a disagreement about the compensation or the claim exceeds the full bond amount, an application can be filed to the state’s Tribunal. This is where a condition report will become imperative evidence to use to make a claim.

A condition report is a comprehensive document which visualises and describes the condition of a property at the time the tenant moved in. Accompanied by photographs of existing damage, the condition report is a handy document to refer to over the months and years of a tenancy. During routine periodic inspections, the condition report can be updated and referred to in order to understand the damage to or deterioration of a property.

Hire Help

A property manager will understand and advise on the rules and obligations landlords are ultimately responsible for, and where needed, act on a landlord’s behalf. A property manager can tap into tools and resources to stay up-to-date on changing legislation for both tenants and landlords, monitor the market and the repercussions this may have on rental prices, as well as carry out periodic reports or manage repairs. They are a vital asset to ensure an investment property is receiving maximum returns and as a landlord you’re adhering to your half of the contract.

To engage with a reliable property manager to assist with your investments, contact CPS Property today.

One step is to regularly review your rents and ensure they are at market levels, while giving tenants ample prior notice of rental increases. This will assist you in keeping your tenants content living in your investment property.

Multiply the average rental yield of comparable properties in your suburb by the estimated value of your property and you will get a ballpark figure of the annual rent you should be achieving.

When it comes to maximising your rental returns, a property manager can be an invaluable member of your property investing team.

For more tips, read the full article on realestateinvestar.com.au

Are you ready to maximise your rental results? Contact CPS Property.

Here are 10 easy renovation ideas that instantly increase your property’s value, including painting your interior and updating your patio.

Read the full article on onthehouse.com.au

Looking to sell your property? Contact CPS Property.

1. Scope out the competition

Before embarking on a home improvement mission, investors need to understand how their property measures up to those of their competitors. Blayney Potential Plus director Fiona Blayney says the first step is learning what similar properties in the rental market have to offer.

“Owners could go and have a look at other properties in their current market at the rate above, and even at the rate below,” she says.

Owners familiar with competing properties will have a better understanding of how a makeover may impact their weekly rent.

However, given the strength of the market in recent years, she warns some properties in popular areas may already be at the peak of their rental value.

“You may want to up the rent you charge, but you could already be getting the top dollar for that property as it is. If it was to become vacant, you’d potentially need to do some work to even get the same rent you’re earning now,” she says.

2. Avoid overcapitalising

The most common mistake owners make is going overboard with improvements, according to the director of Renovating for Profit, Cherie Barber.

“They spend way too much money on the renovations because they tend to get emotionally connected to the property. They forget the focus is on numbers,” she says.

Before picking up a paintbrush, investors need to sit down and work out their budget. Ms Barber warns overcapitalising may actually decrease the property’s rental yield. “You may have been better off not doing anything at all and getting a better rental yield,” she says.

Ms Barber considers a six per cent rental yield a decent return on investment in today’s market. “It’s always worth knowing what your renovation is going to return you in terms of rental yield before you start renovating,” she says.

Director of Let’s Rent Lisa Indge believes many investors lose sight of their target demographic. “We have a lot of investor clients who might be used to spending $20,000 or $30,000-plus on a kitchen. But that’s not warranted in a one-bedroom apartment in the inner city,” she says.

Owners need to focus on the needs of their tenants rather than their personal preferences, she says.

Knowing your market can also help you target your upgrades specifically at your desired tenants, according to director of Metro Property Management Leah Calnan.

“You have to look at your market and the type of property you have,” she says. “If your property is a four-bedroom house and it generally attracts four individuals, then you’re not going to spend a huge amount of money in the garden. You’d be better off potentially putting in air conditioning.”

With this approach, the investor can avoid wasting resources on projects that do little to heighten the property’s appeal.

3. Put on a coat of paint

The easiest way to brighten up a property is a fresh coat of paint, according to Ms Barber. She believes investors will see a significant return for every dollar they invest in internal paintwork.

Ms Indge agrees, saying tenants place a premium on cleanliness. “It presents the property as being very clean and that’s very important to tenants. It’s fresh and it just gives the impression of newness,” she says.

This is especially important if the property is going to be vacant, as scuff marks become more obvious in an empty room, she explains.

Ms Barber explains walls can become discoloured over time, particularly in high traffic areas or if previous tenants smoked. Painting can take several years off the age of a room.

While neutrality is important, a splash of colour may make the property stand out in markets with low demand and high supply, Ms Calnan advises.

“Sometimes, adding a splash of colour, a feature wall or something simple but effective will make people remember that listing over another one,” she says.

4. Fix up the little things

While wobbly door handles or loose floorboards are easy for the owner to overlook, tenants are likely to notice these defects. Poor upkeep could be interpreted as a lack of concern by the owner and property manager.

If the owner does not care about looking after the property, why should the tenant? Ensuring these little repairs are completed makes the property seem well cared for, Ms Indge advises.

Ms Calnan agrees these easy fixes can make a substantial difference to the property’s ambience.

“Changing light fitting is really quite a cost-effective process,” Ms Calnan says.

“Sometimes, changing door handles throughout a property and even kitchen cupboard door handles can be quite cheap but can brighten things up,” she says.

5. Freshen up the kitchen

The kitchen is one of the most important rooms in the house. Improvements in this space are highly likely to increase tenants’ interest in the property.

However, even in older homes, Ms Barber advises investors against a full kitchen renovation unless absolutely necessary.

“That’s a big mistake that a lot of people make when they’re selling or renting their properties. They get in and rip the whole kitchen out,” she says.

A new kitchen could cost the owner upwards of $10,000, she estimates. Yet in many cases, the room can be freshened up for less than $1,000. Laminate paint, bench top resurfacing kits, faux stone bench tops and tile paint can give new life to a tired kitchen, she says.

Ms Indge believes even updating cupboard doors can lift the marketability of an old-fashioned room.

“If you have a fairly well designed kitchen and it has timber cupboards, you could have those painted to look more modern. If you wanted to go a step further, you could simply have the cupboard fronts changed,” she suggests.

6. Modernise the bathroom

Doing up the bathroom seems like a daunting process, especially if it involves new fixtures or plumbing work.

However, there are many products on the market to give the bathroom a lift without extensive remodelling, Ms Calnan says.

“The older properties where you have lots of coloured baths, or pedestals or vanities, you can get those painted. You don’t need to have your pink bath anymore,” she says.

Cosmetic upgrades are especially important in older houses. Bathrooms from the 60s and 70s tend to have vibrant colour combinations and patterned tiles, according to Ms Barber. “They looked great in their day, but now they look quite hideous,” she says.

Rather than retiling the whole room, tile paint can modernise the colour palette for less than $60 a tin, she says.

7. Neaten up The Gardens

The exterior of the property is the first thing a tenant will see, creating a lasting impression. Ms Blayney says a quick way to beautify the garden is to invest in more mature, indigenous plants.

“If you spend that little bit more, you get something a little bit bigger and more established,” she says.

Fresh tan bark can also improve the appearance and durability of the garden, Ms Calnan says. However, she reminds plant-loving owners that not everyone shares their enthusiasm for gardening.

“I think sometimes owners go the wrong way and put in a huge selection of plants, but quite often they die during that time – not everyone is green-fingered,” she says.

Ms Barber agrees, saying many tenants put little stock in the outside appearance of the property.

“A lot of tenants have the mentality of ‘I just want the space that I’m actually living in directly to look nice’,” she says.

While the lawns should be kept mown and the garden free of weeds, owners would be better off concentrating their money on the inside, she suggests.

Ultimately, the best way to boost rental income is through the help of an experienced and responsive property manager. Talk to us today about our property management services.