Why bid at an auction by telephone?

There are many reasons why you may prefer to bid at an auction by phone, rather than attending in person. These may include:

Geography: You may want to bid on a property that is rural or located interstate. Or you may want to bid at several auctions being held on the same day and can’t attend them all in person. If that’s the case, you may be better off organising someone to be there for you and work with them over the phone.

Nerves or inexperience with bidding: A lot of people feel nervous about bidding for themselves – it’s a normal reaction. It’s also normal to feel intimidated by other bidders, particularly if you’ve come face-to-face with some competitive types! Bidding over the phone can help you remain objective by keeping the excitement of the situation at arm’s length.

Avoid overspending: It’s easy to get carried away by the excitement at an auction and bid above your budget. If it’s a property you really want, it’s hard to stop adding another thousand when the object of your desires is only a few meters away – that’s why they often hold auctions at the property’s front door! It’s easier to stay in control if you place your bids remotely, because you can give your bidder an absolute spending limit.

What are the pros and cons?

Auctions can be loud and stressful, and bidding by phone can take a lot of the anxiety out of the experience. When the auctioneer starts spruiking and the crowd gathers, you won’t be distracted as you try to sort the sticky-beaks from the serious bidders. You’re more likely to remain calm on the other end of the phone, and go about things in a business-like fashion.

By the same token, not being able to see the other bidders can be a disadvantage, as you won’t be able to read their body language and gauge the competition. That’s where communication with your stand-in is essential! You may even like to use Skype, FaceTime or a similar app, so that you can “see” the competition during the auction.

How do you go about organising it?

The first step is to check that phone bids are accepted by the auctioneer, agent and vendor. If they are, you’ll most likely have to register and fill out a form beforehand nominating a stand-in to bid on your behalf. Then it’s simply a matter of nominating someone to bid for you. You may also like to organise your solicitor to be available in the event that yours is the winning bid.

What happens if the property is passed in and you want to negotiate?

If the bids do not meet the seller’s reserve, the property may be passed in or withdrawn from auction. If you are the highest bidder, you’ll have first dibs on negotiating with the seller. Your agent or contact on the other end can do this for you whilst you’re still on the phone, or can pass over the phone to the auctioneer or seller so you can speak with them directly.

How do you pay the deposit and sign on the dotted line if you succeed? When you fill out the paperwork to nominate your stand-in, you can specify how you’ll pay the deposit on the day if successful (usually 10 per cent of the purchase price). You can authorise the agent or auctioneer to complete a signed blank check, provide a signed bank cheque for 10 per cent of your maximum bid, authorise the stand-in to pay the deposit on your behalf, or transfer the money into the agent’s trust account.

In terms of the sale contract, you can nominate the authorised bidder or auctioneer to sign on your behalf. Alternatively, you may like to be present and go along to sign once the phone bidding is over, or tee up your solicitor to represent you beforehand.

Bidding at auction by phone could be a less stressful way of securing your dream home or investment property. It can also be more convenient if you’re not close by. Remember, organising pre-approval on a loan before the auction is vital, so please get in touch with your mortgage broker at Element Finance Fremantle and Joondalup. With any luck, you’ll hear those magical words on the big day – “sold to the bidder on the phone!”

Negative gearing

Put simply, negative gearing is when the costs of owning a property – like the interest repayments, rates and maintenance costs – exceed the income you receive. Say you earn $25,000 in rental income and your expenses add up to $35,000, the property would be negatively geared to the tune of $10,000. This could potentially provide a significant tax break, which is why negative gearing is a popular strategy with property investors.

Positive gearing

As you may have guessed, positive gearing is the opposite of negative gearing. It’s when the income you make on a property is greater than the expenses. This could provide you with an income, however it should be noted that you will most likely be required to pay tax on this income. Another term for this is ‘cash-flow positive’.

Depreciation

‘Depreciation’ is a term used to describe the decrease in value of an asset over time. With a property investment, it includes items like stoves, carpets and hot water heaters. Each of these items depreciates a little bit each year according to a Depreciation Schedule you have drawn up by a Quantity Surveyor, and these amounts may potentially be claimed back as a tax deduction.

Capital gains

A capital gain is the amount by which the property increases in value, relative to what you paid for it. A capital gain is usually realised when you sell the property. However, if your property goes up in value, you can often borrow against the capital gain (also known as accessing your equity) by asking a lender to value the property and refinance your loan.

Capital Gains Tax

Capital Gains Tax is the tax you pay when you sell an investment property that has gone up in value since you purchased it. You need to report capital gains (and losses) in your income tax return.

Equity

Equity is the proportion of the property that you own. So, if the property’s worth $600,000 and you owe the bank $100,000, you have $500,000 in equity. Equity can be used in a variety of ways, for example you can potentially borrow against it to buy additional properties or fund renovations.

Rental yield

The rental yield refers to the money your tenants pay you. Rental yield is calculated as a percentage of the property’s value. You can calculate the gross rental yield by multiplying the weekly rent by 52 weeks, divided by the property’s value.

LVR

LVR stands for loan-to-value ratio. Essentially, it’s the percentage of money you borrow for a loan, compared to the value of the property. Lenders generally like to keep the LVR within 80% – so you would need a 20% deposit. If you don’t have a 20% deposit, you will be subject to lenders’ mortgage insurance which protects the lender if you default on the loan. This can be expensive.

We hope you’re feeling more comfortable with the lingo now! Our role as your mortgage broker is to advise you how to structure your finance according to your property investment strategy, and find you the right investment loan for your specific financial circumstances and goals. So, if you’re thinking about making a property investment, don’t hesitate to call your Element Finance Broker in Fremantle or Joondalup!

Interest Rate News

While the Reserve Bank of Australia decided to leave the cash rate on hold at 1.5% this month, lenders have been changing their interest rates outside of the RBA’s movements. Suncorp, for example, increased interest rates on all variable home loans in March, including those for owner-occupiers on principal and interest loans, quoting the rising costs of funding as the reason for the move.

Last month, we also saw the US Federal Reserve raise their official cash rate from 1.5% to 1.75% – the first time in 18 years the cash rate in the USA has been higher than Australia’s. The move has set chins wagging about whether the RBA will follow suit, but most economists don’t predict a cash rate rise for us just yet.

Property Market News

Over the month to March 31, the combined capital city home value average dropped -0.19%. Sydney saw the highest decline of -0.29%, while Melbourne saw prices drop -0.24%. In Adelaide, home dwelling values were down -0.26% over the month. However in Brisbane, home values increased by 0.07%, in Darwin they were up by 0.98%, Canberra 0.24%, Perth saw 0.31% growth and Hobart recorded the highest growth in dwelling values for the month at 1.68%.

Auction activity was through the roof in the week prior to Easter. CoreLogic recorded the highest level of auctions over the year-to-date as at March 25, as well as the highest volume of auctions ever recorded across the combined capital cities. Overall, 3,967 auctions were held (the previous record was 3,908 for the week ending November 30, 2014), with a preliminary clearance rate of 65.5%.

Melbourne led the way with a record busy week in which 2,078 properties went to auction, and 67% sold. Sydney held 1,359 auctions and achieved a clearance rate of 66.2%. In Brisbane, there were 194 auctions and almost half of the properties went under the hammer (49.2%). Adelaide held 143 auctions, and cleared 67.3% of stock. In Canberra, there were 129 auctions and 73.8% of properties sold. Perth held 57 auctions (achieving a 24% clearance rate) and Tasmania had seven auctions (66.7% of properties sold).

With interest rates remaining low, record levels of properties going to auction and prices coming down, now could be a fantastic opportunity to make your next property purchase! Speak to us about your finance options, and we’ll find you a loan that ties in with your financial situation and goals. And if your existing home loan interest rate rose in March and you’d like us to compare the market for a more competitive option, please don’t hesitate to give us a call at Element Finance Fremantle and Joondalup.

Dye your own eggs

Dyeing and decorating eggs is a great way to get into the spirit of Easter, particularly if you have children. It’s super easy and fun! Simply boil up some eggs then make the colouring. Mix 1 teaspoon of vinegar and 20 drops of food colouring in 1 cup of hot water. For different colouring effects, leave the eggs submerged for different amounts of time. Get creative with glitter, stickers and multiple colours, and let the good times roll!

Easter egg hunt

Easter egg hunts conjure up fond childhood memories for many of us, so why not celebrate this year with an egg hunt in your backyard? You could even go all out and make it a clue-based Easter egg hunt if your players are a little older. If you’re looking for an egg hunt on a bigger scale, check out your local entertainment guides or newspapers. There may be community events such as this Easter egg hunt and family picnic in Melbourne.

Easter brunch for the adults

Another idea is to host a lavish Easter brunch and invite your nearest and dearest. There are plenty of great Easter recipes online, for example, this lamb recipe with caramelised onion and carrots sounds divine. If you’re looking for a dessert to ‘wow’ your guests, try making this hot cross bun and rhubarb cheesecake. It’s positively decadent!

Volunteer

Taking part in a feel-good activity like volunteering is be a wonderful way to celebrate Easter. You could help in a soup kitchen or lend a hand at your local opportunity shop. Retirement villages often need volunteers to chat to the elderly and keep them company. For inspiration, check out the volunteer opportunities on GoVolunteer. There are heaps of options, from becoming a volunteer tutor to refugee high school students to doing some light gardening in an aged care facility. You may even be able to find a volunteer activity for the whole family!

Real story of Easter

If Easter has religious significance for you, you may like to share the story of Easter with the kids. You could curl up on the couch as a family and watch biblical moves, or check whether your local church has any special Easter services or displays.

Host an Easter hat parade

New clothes, or a new hat at Easter is an ancient tradition, but these days it’s the realm of little kids who love getting crafty and dressing up. Celebrate both tradition old and new, by hosting an Easter hat parade! Invite all your kids’ friends to put their creative thinking caps on and bring their Easter hats to the party. Prizes for originality are a must.

Bake an Easter bunny cake

If you love seeing the ubiquitous Easter bunny at this time of year, why not bring him into your home as well? You could bake an Easter bunny cake and enlist the help of your kids. If cooking isn’t your strong point, here’s a great recipe for an Easter bunny cake, complete with a how-to video.

Make Easter basket gifts

Making an Easter basket is another fun activity to do with the kids. Why not move away from traditional baskets and go for a non-conventional design? You could use a glass jar and turn it into a terrarium filled with Easter eggs and decorations. Alternatively, transform an old watering can into an eye-catching Easter “basket” by getting creative with some ribbon. Check out this slide show for inspiration.

Make Easter cards

Put the kids to work making Easter cards for family and friends. It’ll keep them busy and the recipients will love receiving a handmade gift from a child in the mail. Cut up last year’s cards or collect Easter-themed cut-outs from junk mail advertisements. Discount stores usually stock a treasure trove of creative bits and pieces for this kind of activity.

Have a toy exchange

Recycle and spoil the kids at the same time by hosting a toy exchange or swap party! Go through your little one’s belongings and purge any unwanted items (you may have to do this when they’re not around). Invite other mums to do the same. You could make it fun by giving the kids “tokens” to redeem for new toys. Anything that’s left over at the end could go to your local charity shop.

We hope you find these Easter celebration ideas handy! We’d like to wish you and your family all the best for the Easter Holidays. Remember to give your Element Finance mortgage broker in Joondalup and Fremantle a call if you need support for your Autumn property purchasing plans, once the break is over. We’d love to hear from you.

Income Protection

This type of insurance provides an income safety net should you become sick or injured and are unable to work and make your home loan repayments. You may also like to consider trauma/critical illness cover, total and permanent disability insurance and life insurance – that way if you are unable to go back to work, you won’t lose your home.

Mortgage Protection 

Mortgage Protection insurance covers the cost of your mortgage repayments if you die, or become seriously ill. It should be noted that it is only meant to cover your mortgage repayments and not any other expenses for you or your family. It may be a wise choice if you already have some other kind of life insurance – say with your super plan.

Building & Contents

Building or home insurance protects against the cost of rebuilding or repairing your home from things that are outside your control, like fire or natural disasters. You can opt for total replacement cover (to rebuild your home as it was prior to the event), or sum-insured cover (coverage up to a certain amount). When you buy a home, your mortgage broker will most likely recommend that you insure the property before settlement day.

When choosing your policy, make sure you have the right amount of coverage, as well as the right type of insurance for your actual needs. Talk to us, as we are an invaluable source of information to help you determine this.

Contents insurance protects your belongings, including carpets, rugs and curtains, in events such as fires, storms or theft. Often it will be bundled together with home insurance. Many people consider it a must-have to protect from those smaller disasters – even a contained kitchen fire could render your home unliveable until you can repair the damage!

How can your mortgage broker help?

We can access some of Australia’s most respected insurance providers, and offer you a competitive price on your insurance needs. What’s great is that we can do it all – from setting you up with a home loan that meets your financial circumstances, and also help you to arrange the right insurance to protect you and your family. You’ll find we can offer a range of options and make it easy. You may also be able to save by bundling insurances together, so please get in touch today!