Thinking of a property investment in Sydney? Find out the latest property hot spots, and strategies to ensure you get the best outcome.

bidding at auction

Bidding at auction is a nerve wracking experience for most people. We have helped hundreds of our clients successfully purchase at auction and have put together a list of useful tips and strategies to ease the stress and help you feel confident bidding on auction day.

Tax tips for property investors

Tax tips for property investors

With the end of financial year fast approaching, we thought we would provide some general tax tips for property investors to consider:
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Crows Nest Woolworths

Where are the best suburbs to invest in lower north shore real estate?   Homesearch Solutions currently recommends the suburbs of Chatswood, Crows Nest & North Sydney as hot spots for your investment property purchase.  First of all this is because these are all areas that currently have appeal, great amenities and good proximity to […]

granny flatsIf you are looking to become a property investor things are looking good for you right now. And, if you happen to be the grandmother of an investor in NSW, you could count your lucky stars.

Interest rates are steady after dropping over the past few months, rental returns are climbing and it’s a great buyers market.  But wait, there’s more… there is a way you can increase your return dramatically.

With the Affordable Rental Housing – State Environmental Planning Policy (SEPP) or granny flat initiative introduced by the NSW government in 2009, you can add a granny flat to your investment property and rent it separately, resulting in an increased yield and good depreciation benefits. You can also add a granny flat to your own home if you have a large enough block size.

This strategy allows investors to dip their toe in property developing starting with a smaller project like the granny flat to build their property portfolio.

The Sydney market can be expensive, which is what sent one me further afield to find a more affordable investment area.

After purchasing a few investment properties in Sydney, I found that they were all negatively geared. I needed to find properties that would assist with cashflow not drain me.  My research took me to the Hunter region of NSW, and it’s there that I found the perfect fundamentals for an investment market. The local economies are booming thanks to the coal mining industries but also very diverse with wine growing, tourism, manufacturing, agriculture, horse breeding and retail all supporting strong employment.  Coupled with massive government spending on infrastructure projects and strong demand for rental properties, I thought I’d struck gold.

Property Bloom now offers a granny flat service along with our other development strategies. We find properties suitable for a granny flat development, usually three-bedroom houses on large blocks, but not just any houses. They need to meet a long list of our criteria.  We manage all the fine details, including renovating the house and building the flat, creating a positively geared investment.

Investors will benefit from casflow from the rent on two dwellings and also receive good depreciation benefits on the new flat.  This means people can keep moving forward with their investment strategy.  Unlike buying a single apartment in a capital city for instance, which is likely to be negatively geared, adding a granny flat to a property that already has an existing dwelling can result in a cash-flow positive situation.

In the past granny flats were only permitted in certain residential zones, but this SEPP has opened up a whole new real estate door. The aim of the granny flat is to boost the supply of affordable rentals by providing housing for the elderly so families can support each other, as well as the younger generation who are living at home and are not in a position to move out just yet.

Government projections show us that single-person households are likely to be the fastest-growing sector over the next 20 years, so demand is definitely there.

Small secondary dwellings are an attractive option for singles and couples who don’t need a lot of room and are the most likely people to be under rental stress. Young people are also staying at home longer, and granny flats can provide extra space for them and be a lifesaver for baby boomers who were hoping to empty their nests sometime soon.

In the Hunter, we are finding properties for around $240,000 and with the addition of a two-bedroom granny flat, which we can build for around $95,000; it’s a really affordable investment for a total cost of around $350,000. These projects are creating a 9% to 10% gross rental yield, and like the northern beaches, the rental markets are extremely tight in the Hunter. This type of development suits someone starting out in developing or an investor looking to create a positively geared investment.

To take advantage of the NSW government’s Affordable Rental Housing – State Environmental Planning Policy (SEPP) the regulations include:

  • Granny flat must be no more than 60 square metres in size
  • Land must be more than 450 square metres
  • Can only be one house and one granny flat on the land
  • The land cannot be subdivided
  • You will need to comply with the LEP of your council (contact council re building
    requirements)
  • It must meet the requirements of the Building Code of Australia

For more information on the Affordable Housing SEPP visit the government’s website.

Source : Jo Chivers, Property Observer. 16 February 2012

 

buying property with super

Buying Property with super

Self-managed super fund property rules

Buying property with Super and your SMSF is only permissible if you comply with the rules.

The property:

  • Must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members
  • Must not be acquired from a related party of a member
  • Must not be lived in by a fund member or any fund members’ related parties
  • Must not be rented by a fund member or any fund members’ related parties.

However, your SMSF could potentially purchase your business premises, allowing you to pay rent directly to your SMSF at the market rate.

What it will cost you

SMSF property sales may have many fees and charges. These fees can add up and will reduce your super balance.

You should find out all the costs before signing up including:

  • Upfront fees
  • Legal fees
  • Advice fees
  • Stamp duty
  • Ongoing property management fees
  • Bank fees
  • SMSF borrowing

    Borrowing or gearing your super into property must be done under very strict borrowing conditions called a ‘limited recourse borrowing arrangement’.

    A limited recourse borrowing arrangement can only be used to purchase a single asset, for example a residential or commercial property. Before committing to a geared property investment you should assess whether the investment is consistent with the investment strategy and risk profile of the fund.

    Geared SMSF property risks include:

    • Higher costs – SMSF property loans tend to be more costly than other property loans which must be factored into your investment decision.
    • Cash flow – Loan repayments must be made from your SMSF which means your fund must always have sufficient liquidity or cash flow to meet the loan repayments.
    • Hard to cancel – If your SMSF property loan documentation and contract is not set up correctly unwinding the arrangement may not be allowed and you may be required to sell the property, potentially causing substantial losses to the SMSF.
    • Possible tax losses – Any tax losses from the property cannot be offset against your taxable income outside the fund.
    • No alterations to the property – Until the SMSF property loan is paid off alterations to a property cannot be made if they change the character of the property.

 

See ASIC’s Money Smart or the ATO website for more information on Self Managed Super Funds and property purchase.

 

 

New Unit Depreciation?

Many financial planners and investment property “experts” advise people to buy brand new units so that they can get the tax depreciation benefits, which can be offset from their personal income for their annual tax return.
However from what I have seen from many of these brand new “generic” units over the past 10 years, particularly ones in medium to large complexes, is their relative lack of capital growth compared with say older style art deco units or even 1960/70’s buildings that are in a better location (for Sydney – near beaches, inner city, harbour etc).
A new investment property buyer claims depeciation expenses on an annual basis, but when eventually selling the property they have to add back in the total of those benefits claimed for capital gains tax calculations anyway, thus negating the benefit in the overall property transaction.
The bottom line is that the tax depreciation benefits gained by buying new units will rarely equal the extra capital growth achieved with buying an older style unit in a better location.
Many new unit complexes tend to be built in former industrial areas or on the city fringes because the land is cheaper, and are often not close to amenities.