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What is an investment property research house?

What is an investment property research house?

Apr 3, 2017 | Investment Property

While helping hundreds of clients finance their investment properties, I noticed very clearly that a lot of my clients base their decisions on three areas;

  • what they have read in the media,
  • The advice of well-meaning but ill-informed family and friends, or
  • what they know (for example, buying investment property where they live because it’s familiar).

Are you one of those people? This is where a research house can help you!

What is an investment property research house?

For property investors, getting to know the dynamic property market requires a lot of time, deliberation and agility. An investment property research house can help ease the burden on investors by sharing in-depth knowledge on market trends, including growth areas, hot spots and positive and negative cash flow areas.

An investment property research house is comprised of a team of experts in the field of property investment. They conduct research into the macro and micro factors which influence growth and decline and assess property’s desirability. Utilising detailed property data, they are equipped to advise investors on the best properties to invest in, in order to achieve the best possible return on investment.

A wise property investor will manage two main factors when buying property, knowledge and emotion. They will gain as much knowledge as possible on the property market by speaking to experts in the field and they will keep emotions at bay when making any investment decisions. The latter can often be difficult as investors can easily get swept up in the excitement of a purchase, or make choices based on their personal preferences, which can reduce the quality of an investment. This is why many investors choose to work with an investment property research house. Engaging these experts can help investors understand the hard facts while eliminating emotion from the equation.

Which macro and micro factors do the experts consider?

Some of the macro factors that are considered by an investment property research house include how the economy is performing, where jobs are growing, where the population is growing and the demographics of growth areas. They will also consider where public and private infrastructure is being invested in, where construction is taking place, which areas are desirable and where there is a lack of supply but high demand.

These macro factors provide insights into hotspots and growth areas, ultimately uncovering the best suburbs in which to invest.

Some of the micro factors that are considered include the quality and design of a property, a property’s proximity to transport, a property’s walkability score and potential rental return.

All of these factors can help investors to locate the best places in which to invest and narrow down the specific properties within these areas to achieve the best return on investment.

Using extensive research methods and comprehensive data, investment property research houses provide unlock information for investors to ensure they make the right property decisions.

Contact me today on 02 9095 6888 to discuss your potential investment opportunities and speak to our Property Specialist………Cause we work for you! 

How to improve cash flow as a property investor through interest only loans

How to improve cash flow as a property investor through interest only loans

Sep 20, 2016 | Interest rates, Investment Property

When an investor determines their long-term investment strategy and objectives, the loan structure is an important factor to consider as it can significantly impact the overall success of the investor’s portfolio. Seeking the advice of a financial professional will help identify which loan is right for the outlined objectives. Many investors might shy away from an interest only loan due to a fear that they will fail to chip away at the entire mortgage, however, if used correctly, this option is highly beneficial for an investor’s cash flow.

Lower monthly commitments

An interest only (IO) loan requires the owner to only pay the interest charged on the loan each period, rather than making repayments towards both the principal and the interest. Using a home loan interest rate of 5% as an example, the monthly repayment on a $300,000 mortgage over 25 years would be approximately $1,754 per month for both principal and interest. However, if you were making interest-only payments, the monthly cost would drop to approximately $1,250 per month. That means more money in your pocket each month.

Improve cash flow

Not only do interest-only loans allow you to lower your overall periodic commitment, but payments you do make will help your cash flow and improve your ability to reinvest. By having a smaller financial commitment month to month, an investor has more flexibility to help pay for living expenses, boost savings and not feel bogged down by the mortgage. Or alternatively, property owners could look at putting this additional cash towards a loan that isn’t tax deductible – such as their home loan to help pay it off more quickly. Of course, investors may also choose to use these funds to further build their investment portfolio.

Many investors look to sell assets throughout the journey of the loan in a bid to increase their overall equity and wealth, which is why two in three investor loans are interest only.

Tax-deductable

Any repayment that is made on the interest of a loan is tax deductible. However, payments on the principal are not tax deductible. This means that savvy investors can maximise the tax advantage through an interest only loan.

Many investors choose high appreciating properties so they can pay off the principal at the end of the term when selling the property, therefore increasing cash flow throughout ownership of the property.

Build an asset base

Interest only loans allow you to build a bigger asset base.

Take the following case study as an example. John and Sally bought in the inner city suburb of “Heavensville” in 1986. The average home loan in the 80’s was $75k and instead of trying to pay off the investment property loan, John and Sally chose an interest only loan.

With the extra $500 a month they had in their cash flow, they bought another investment property with a mortgage of $100k. Over the next decade Sally and John continued to buy investment properties every two to three years and again chose interest only loans with debts of $150k, $200k, $250k and $300k.

20 years after buying their first investment property in Heavensville they sold it for $1.5 million. John and Sally were able to not only pay off the debt, but were also able to pay off their owner occupied home loan and just about all of their investment property portfolio debt.

This example shows its not about how much money you earn, but how hard you can make your money work for you.

To find out more about whether an interest only loan is right for you contact me on 02 9095 6888

This article is the second in our article series – Cash flow secrets for property investors. Watch this space for more great tips!

How to improve cash flow as a property investor through the asset holding structure – tenants in common

How to improve cash flow as a property investor through the asset holding structure – tenants in common

Sep 9, 2016 | Investment Property

Investors need to be informed and educated on the ownership structure of their property portfolio. The right structure can have a significant impact on tax, depreciation, cash flow and what should happen in the case of a deceased property. The most common ownership structures include individual ownership, joint ownership, ownership through a trust or Self Managed Super Fund (SMSF). Seeking the advice of a financial professional from the outset will help identify which is best for your property strategy, and outline the different tax implications and potential risks.

Joint ownership structure: tenants in common

A joint ownership situation is where two or more people own a portion of the property. Often joint ownership is between husband and wife, siblings or friends who purchased the property together, however, anybody can enter into a tenants in common agreement.

A tenants in common structure gives owners the ability to split the share of the asset whichever way makes sense for all parties. For example, if there are two owners of a property it does not automatically mean both owners need to hold a 50 percent share, but rather they could split it 60/40 for instance.

Unlike other joint ownership structures, if a tenant in common passes away, the share of property they owned does not automatically go to the other titles on the property. But rather, the asset can be distributed as per the details outlined in their Will. It’s important that all parties involved in the ownership of a property understand the legal and financial implications should an owner pass away.

A tenants in common structure differs to a joint tenant scenario. A joint tenant structure generally involves defactos or married couples who own a property together. Under this structure should one of the partners die, the other partner will automatically claim the rights of the property.

So, how does tenants in common improve cash flow?

A common scenario for a tenants in common structure would include a husband and wife who have substantially different incomes. For instance, if the husband earns the lion’s share of the household income, and the wife works part-time earning less, the couple might distribute the property’s ownership as 99 percent to the husband, and 1 percent to the wife. This means that 99% of the tax benefits apply to the higher earner including depreciation, interest bills, council rates and notices. This will improve day-to-day cash flow.

The significant tax benefits of the tenants in common structure contribute to extra cash flow for investors to lessen the financial burden of investments or to reinvest.

One of the other benefits of a tenants in common structure is that it provides investors with an easier method to enter the property market or sustain an existing property portfolio. The ability to team up with one or more people means mortgage repayments and expenses are split, therefore making assets more manageable and improving borrowing capacity.

To find out more about the tenants in common structure contact me on 02 9095 6888