Are you new to the world of property investing? Does the jargon leave you feeling confused? Well, fear not, investor-to-be! We’ve put together a comprehensive list explaining the most difficult terminology. By the end of this article, you’ll sound just like a seasoned property investor when conversing with your friends at the dinner table, and maybe even feel inspired to buy an investment property of your own!

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!

Residential property investment has long been popular among Australians, but far fewer venture into commercial property – like office buildings. While residential real estate may be more familiar, there are many benefits of commercial property investment, which is why it’s worth considering as a viable investment option. In recent times, we’ve seen strong demand for offices, coupled with short supply in some areas, which may help to make it a profitable investment. In this article, we explain why it may be worth considering commercial property investment as part of your property investment strategy.

The pros of commercial property investment

Commercial property investing can offer significant cash flow benefits. Some commercial properties offer rental returns of more than 8 per cent, compared to the current median rental yield across the combined capital cities of 3.32 per cent (based on CoreLogic data). What’s more, commercial properties usually offer greater rental certainty due to the long-term nature of leases. Commercial leases often run for between three and 10 years, and agreements usually contain a term for set rental increases in line with inflation.

With commercial properties, there are also fewer ongoing expenses involved. Tenants usually cover most maintenance, rates, insurance and body corporate fees, unlike with a residential property, where the owner foots the bills. Another perk is that if the tenant puts in a new fit-out at their own expense, the improvements may increase the value of your property without it costing you a cent.

The cons of commercial property investment

It can sometimes be difficult to find new tenants for commercial properties, so as an owner, it’s important to be prepared to cover the expenses if the property is untenanted for an extended period.

Economic factors can also heavily impact on the health of a commercial property investment. For example, economic downturns, high unemployment or poor business confidence could affect demand. That being said, research and choosing the right commercial property in the right location can usually mitigate these risks, just like with residential property.

What should you research? As with any property purchase, research is key to finding the right investment opportunity. Be sure to research local prices and market conditions, any council restrictions or zoning regulations that could affect your investment, and upcoming infrastructure developments.

In terms of location, think about the property attributes your tenant might desire. Is it in close proximity to transport hubs? Car parking? Perhaps it’s close to other complimentary businesses? Always remember the rules of supply and demand – it’s best to make sure there isn’t an oversupply of similar properties in the neighbourhood.

What are the benefits of choosing an office for first-time commercial property investors?

Office buildings may offer a less daunting entry point into commercial property investing for first-timers because of the strong demand at present. According to the Colliers International Office Demand Index (Quarter Four, 2017), Australia’s major office markets are set for a strong start to 2018, on the back of increased demand and activity in 2017.

Colliers measures demand in terms of demand and supply per square meter. In the final quarter of last year, office property markets nationally recorded a 19 per cent year-on-year increase in enquiries (demand), from 415,737sqm in the last quarter of 2016, to 492,947sqm in the final quarter of 2017. Increases were seen across all segments of the market and overall, there were 942 deals for 785,252sqm of office space in 2017. Ask us for a copy of the report if you are interested!

For some investors, buying commercial property such as an office can be a sound investment strategy. If you already own residential investments, expanding into commercial property investment may allow you to diversify your portfolio and generate an attractive income. If you’d like to find out more about your finance options, please speak to us. Commercial property finance can be more complex than residential finance, but we can walk you through the process and find a commercial property loan that ties in with your unique financial circumstances and goals. Contact your Element Finance mortgage broker in Joondalup and Fremantle if you need support. We’d love to hear from you.

Many people begrudge paying for insurance, but the peace of mind that comes from knowing you, your family and your home are protected against unforeseen events is priceless! Insurance provides protection against short term financial hardship and set-backs that could have a serious long term effect on your future financial security.

In this article, we explain the types of insurance you should think about when buying a home. If you’d like to know more, simply talk to us about your requirements, we’re here to help.

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! What insurance do you need to know about when buying a property?

Buying an investment property can be a clever way to build wealth for your future. There are government incentives that make this form of investment great for mum and dad investors – such as the potential to claim back losses as a tax deduction.

So, how do you go about finding the right property for your needs, particularly if you’re not an experienced property investor? In this article, you’ll find some insights about what to look for in an investment property. And remember, when you need the right finance for your investment, we are here to help!

Capital growth potential 

Capital growth is the increase in value of a property over a period of time. Investors use a range of strategies to build wealth, and looking for the properties that are most likely to experience significant capital growth, is often high on their radar.

So, how do you find an investment property with solid capital growth potential? Look for locations and suburbs experiencing economic growth. Economic growth creates jobs, which brings more people to an area, which may flow through to the property market via increased demand for housing. Greater demand means more chance of capital growth.

Next, be sure to choose an investment property that is close to amenities such as schools, shopping centres and public transport – when an area is experiencing economic growth, these properties will be in the most demand.

Rental returns

Some investors choose to focus on properties with a high rental yield, rather than just looking at capital growth potential. The rental yield is the rate of income return compared to the costs associated with the investment property. It’s typically expressed as a percentage, and may be calculated as a gross or net figure.

Investors who are following a rental yield strategy will typically look for areas where rents are high compared to the property value. Talk to us as we have access to have access to exclusive property tools to help you locate a suitable area.

Low maintenance costs

As an investor, it’s wise to opt for a low-maintenance property. They not only cost less to keep, but they’re less hassle too. Units can be easier and cheaper to maintain than old houses for example, but keep in mind you’ll most likely have to pay body corporate fees.

Ways to add value 

When choosing an investment property, ask yourself whether there is room for improvement, or ways to add value. You might not renovate it right away, but when you do, be sure to do plenty of research to find out what’s in high demand. Ask your local real estate agents what kinds of property features resonate well with tenants and future buyers in the area.

Choosing the right investment property requires careful research and planning. Luckily, one area you don’t have to worry about is finding the right investment loan for your specific needs. We can take care of finding you a loan product that matches your financial circumstances, while working with your investment goals. Please call us today!What to look for in an investment property

Christmas is such a special time of year! You can feel the magic in the air at shopping centres as the decorations come out, or when you’re driving around and notice people transforming their homes into a wonderland of lights.

If you’re also looking to fill your home with holiday cheer, here are some unusual festive home décor ideas you’re going to love. And remember, if you need finance for a really big gift (like the kind that’s just too large to wrap), please give us a call!

Create an unconventional tree

If you feel like a change this Christmas, why not invent your own tree? Pinterest has plenty of great ideas, like dressing up a ladder as a Christmas tree or using driftwood to create a rustic-looking tree display. Check out the effect here.

Go big with your light display

Instead of spending a fortune on the electricity bill with miles of rope lights, why not turn your pad into a light show spectacular the easy and inexpensive way, with cool options like Target’s Snow Flurry Lightshow Projector, which blasts a bright swirling display of snowflakes onto your home. Otherwise, you could opt for something more subtle. For example, you could line walkways with luminary bags or lanterns to create an ambient effect. Here’s some inspiration.

Make your own snow globes

If you have small children, they are going to love this one! DIY snow globes are easy to make and a great way to create festive cheer. All you need is a small glass jar, a plastic figurine of something Christmassy, glycerin, glitter, water and glue. Simply glue the figurine to the inside of the jar lid, fill it with water and glycerin, add a couple of teaspoons of glitter, screw the lid back on and glue it down if necessary. There you have it, Christmas cheer in a jar! You can even make a winter wonderland terrarium by adding small twigs, pinecones, and cotton wool to the jar and leaving out the water.

Make merry in the throne-room

Why not dress up your toilet with Christmas cheer and give your guests something to talk about? You could make a Santa toilet lid cover and toilet mat, or if you really want to impress them with your Christmas cheer, invest in an LED toilet bathroom night light like this one, available on eBay. It’s motion activated, so your guests won’t have to stumble around in the dark looking for the light switch.

Jazz up your front door

Have you heard of Christmas front door covers? We hadn’t either, but apparently you can give your house a Christmas facelift with a front door mural. There are some really high-quality designs available, and what’s great is that they are removable and reusable. Banners come in all different colours and feature everything from the big man in red to Christmas trees and nativity scenes. Click here to check them out.

What else would be fun for Christmas?

How about a new family car, boat or a jet-ski? Buying that dream home or investment property you’ve always wanted would also be a great reason to celebrate with your family.

We are here to help you have yourself a merry little Christmas indeed, with a loan for a new home or investment, or tailored finance to fit your other purchasing needs. Please give us a call today!Unique Home Decoration Ideas for Christmas


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