As you scroll through the listings and your eye wanders across all the gorgeous homes in Australia’s most idyllic holiday spots, you’ll also notice the breathtaking prices they command during the peak season. If you’re a property investor, you may find those high price tags make it very hard to resist the idea of investing in a luxury holiday rental property yourself. But is it really going to be a good money spinner?

Three things make a profitable holiday rental property. The right location, the right property and a luxurious fit out that brings your guests back time and time again. So what do you need to do to get set up for a high-yield holiday rental investment?

Choose the right location.

Yes, it is easy to make big dollars from a property by the sea in the height of summer, but you need to look at the total potential rental return across the entire year. Making a decent profit from a holiday rental investment requires a location that will attract holidaymakers all year round, not just in summer.

Ask yourself: what does the location have going for it as a holiday destination year round? Try and choose a location that offers people something special. Australians love the great outdoors and if your investment property is in a location of great natural beauty, it’s likely to be a winner.

A destination that is under three hour’s drive from the nearest capital city and international airport will not only attract local guests, it will attract people from interstate and maybe even overseas. If there is also a regional airport nearby, then all the better.

Choose the right property.

When choosing a property for a holiday rental investment, the first thing you need to take into consideration is the property’s accessibility to the local attractions and tourist hot spots. For example, if you’re investing in a property at a beachside location and want a maximum rental return on your investment, make sure it’s actually close to the beach and not on the other side of town near the highway entrance and the take-away food drive-thru.

Be careful to choose a property that offers a resort-style atmosphere. Avoid anything that is too suburban or ordinary in favour of a property that offers something different, like good views and wide open spaces.

Consider a property that offers plenty of room inside, with at least one sitting room separate from the kitchen living area. It should also have a separate laundry and wet area and of course, plenty of bedrooms. For a luxury holiday rental, a decent outdoor area is a must and a swimming pool will be a major attraction if you can manage it.

Set your property up to attract high paying guests.

Setting up your holiday rental property so that is practical and hard wearing is a good idea, but the trick is to do it in a way that looks luxurious, stylish and expensive so you can attract the highest paying guests. If you want to make the most profit from your investment, you need to make your place look absolutely fantastic in your online advertising photos and make sure it excites and delights your guests when they walk through the door.

Holidaymakers paying top dollar expect better levels of comfort and luxury in a holiday house rental than they do from their own homes. They will expect to find a good dishwasher, a great cooker and a large fridge in the kitchen at the very least. A modern flat screen TV and Wi-Fi is a must.

Your guests will also expect a king-or queen sized bed in the master bedroom and at least one other room with a double bed. Flexible sleeping options that will help them reduce costs by sharing with more people or another family are also a good idea.

Keep the decor simple, stylish and eye-catching – ask a local decorator for advice if necessary and try to create a look that compliments the location. Don’t be tempted to use your holiday rental property as a depository for all the old furniture the family doesn’t want. Red flags are outdated TVs, daggy curtains, garish duvet covers, cabinets with trinkets, clunky second-hand lounge suites, too many ornaments, ugly brown wood shelves, nanna-style light fittings, and horror of horrors, industrial or pub style wall-to-wall carpet.

Combining tourism and hospitality with your property investment can be a great idea if you do it right. If you’re considering buying an investment property in a holiday hot spot, let us know and we’ll help you crunch the numbers to see if it will be a good investment for you. Getting your finance right can make a big difference to your bottom line when investing in any kind property, so call us today to discuss your plans.

Both choices give you a huge range of options, but it’s a decision that could be very important to your future prosperity. So will you choose a brand new property – perhaps buy one off the plan or build the home of your dreams? Or would you prefer an established home in a location you love? To help you decide which one is the right choice for you, in this article we’ve provided you with five good reasons to consider buying a new build and five good reasons to think about buying an established home.

Why buy a new build?

1. Lower maintenance costs.

One of the most attractive things about a newly constructed property is that they are brand new. You don’t have to worry that the hot water heater is about to wear out or you’ll have to come up with the money for a new roof next year.

Of course, a property with no maintenance issues means no maintenance costs – at least for the first few years – which will be very appealing to landlords everywhere. It’s also a big bonus for first home buyers and anyone who can expect cash-flow to be tight in the first few years of home ownership.

2. First home buyer grants and other incentives.

In most states of Australia, there are grants and other government incentives to assist first home buyers when they buy a new build home. These incentives may include the first home buyer’s grant and/or stamp duty savings. It should be noted that these benefits do vary from state to state so to find out more, please visit the government website here.

3. Tax benefits for investors.

If you’re a property investor there could be some tax benefits whether it is a new build or an established home. One of the things you may be able to claim on your tax is depreciation on certain aspects of your property and its contents. These tax benefits tend to be greater and easier to claim on a new build property where the building, fixtures and fittings are all new than with an established property where they may be a number of years old.

For more information about how to claim depreciation tax benefits on your investment property and find out exactly what you can claim, please talk to an accountant or visit the ATO website here. If you don’t have an accountant who knows about property investment, just ask us for a referral.

4. Higher rental yield potential.

People love to live in a brand new property where no one has ever lived before. New build properties make attractive homes because they usually come with all the latest mod-cons, great insulation and the latest energy efficient appliances. You may even find that tenants are willing to pay more rent for a new build property than they would for a similar established home, simply because they know the actual costs of living there will be less.

5. Build the home you really want.

Building your own home, buying off the plan or purchasing a newly completed home may allow you to obtain a home that better suits your needs and lifestyle. It’s a great way to get that dream home you’ve always wanted! Whilst it is often possible to renovate an established home to meet your family’s unique requirements, designing a new one specifically for your purposes may provide better value for money and may be a much more attractive idea to some.

Why buy an established home?

1. Renovate or extend to add value.

Unlike a new build property, an established home may give you the opportunity to renovate or extend which could help you to instantly add value and increase your equity. This can be a very effective wealth-building strategy if you do it well.

2. Be sure you’re not paying too much.

One of the problems with buying a new property off the plan or building your own home is that it is difficult to know exactly what the value of the property will be when construction is completed. This represents a risk because it is possible that you may end up paying more for the property than it is actually worth.

With an established home, it is much easier to obtain an accurate valuation at the time of purchase, so you can be more confident that you are paying the right price. You also get the peace of mind of inspecting the finished property before you buy it.

3. Location.

Building a new property depends on the availability of vacant land for the development. This is most often found on the outskirts of cities. Established homes are more likely to be easier to rent and easier to sell because they are usually located in areas where people actually want to live, which tends to make them more popular with both tenants and property buyers.

4. Historical charm and outside space.

There are people who love a character home and would quite simply prefer to purchase an older, established home rather than a new build. It can be argued that these homes could have better capital gain potential because they are each a piece of history that is unique and becoming increasingly rare. It is also true that land allotment sizes used to be much larger, providing buyers of older established homes with bigger gardens designed to accommodate families with children and pets.

5. Move in sooner.

You never know for sure how long it will take to build a new home. Unforeseeable circumstances can often cause frustrating delays and even something as simple as bad weather can add months to the project. On the other hand, you can buy an established home very quickly. The entire process of locating the right property, buying it and moving in could take as little as three months, maybe even less.

Whether you’re considering buying a new build or an established home, we’re happy to help you weigh up the merits of your choice of property. We’ve helped many first home buyers, next home buyers and property investors to make wiser property purchasing decisions and of course, choose the right home loan to help them make the most of their personal financial circumstances and achieve their goals. If you’d like to find out more about how we can help you make the right choices, just give us a call today.

Many people think that interest-only home loans are only for serious property investors with aggressive purchasing strategies. However, all kinds of property buyers can apply for an interest-only loan and there are a lot of clever ways you can use them to your advantage.

As your mortgage and finance broker, we’re here to make sure you understand the different uses of loan products and how they may apply to your personal financial strategy and purchasing goals. In this article we talk about the pros and cons of interest-only products to help you decide if it’s time to say hello to interest-only.

The Pros

Smaller loan payments.

During the interest-only period of the home loan, your monthly loan payments would be lower than with a principal and interest loan. This is because your payments only need to cover the interest on the loan. Great if you want to reduce your expenses!

Free up cash.

Lower loan payments mean you could use your available cash for other purposes that may be financially beneficial. You could use the money to pay off debts to help save money on interest, make other investments to build wealth for your future, fund a loan to purchase another property or to make home renovations to increase your property value and equity position.

Tax deductible for property investors.

Want to save money on tax? The interest on an investment property debt is usually tax deductible for property investors, as long as you follow the ATO rules. That means an interest-only loan could very beneficial if you are a property investor because it could help you to maximise your tax deductions and cash-flow. Unfortunately, if you are using an interest-only loan product to purchase a home as an owner-occupier, you will not receive any tax deduction for interest.

Benefits are ongoing for the life of the interest-only term.

With an interest-only home loan, you can often choose an interest-only term from 1, 3, 5 or 10 years. This can be very beneficial for tax minimisation strategies and financial planning purposes. It could also be very beneficial for people buying a home on a tight budget as it can help you to plan your finances for the first few years you own the property as well as keep your loan payments lower.

Make payments on the principal when you have extra cash.

Many interest-only home loans allow you to make payments on the principal of your loan if you want to. This means that you can still build equity in your property by making a repayment on the principal of the loan when you have the extra cash.

The Cons

It’s possible that you may not build any equity.

Interest-only loan payments do not help you to build equity in your property because your loan payments do not pay down the loan principal. That means you will be relying on property prices to rise to gain equity (unless you make extra payments as mentioned above).

When the interest-only period ends, the loan will revert to a principal and interest loan and your loan payments will increase unless you make other plans.

If you decide to take out an interest-only loan, you should be careful to plan ahead for what you will do at the end of your interest-only period. At that time, you will have to decide whether to renegotiate another interest-only term, allow the loan to revert to a principal and interest loan, refinance the loan, or sell the property to pay off your debt.

An interest-only loan will cost more in interest over the life of the loan than a principal and interest loan.

Very few people keep a loan for the full 25 years, but you should be aware that the cost differentials between an interest-only loan and a principal and interest loan can be quite significant when calculated over the entire life of the loan. For example:

• With a normal principal and interest loan for $500,000 at 4.78% p.a. based on an LVR of 80% over 25 years, the total cost of interest on the loan would be$357,766 over the 25 year period.
• On an interest-only loan for $500,000 at 4.78% p.a. based on an LVR of 80% over 25 years with an interest-only period of 10 years, the total cost of interest on the loan would be $440,443 over the 25 year period. This means that the interest-only loan could cost you an additional $82,676 in interest compared to a 25 year principal and interest loan.

You may miss out on a golden opportunity to pay down the principal while interest rates are low.

Is a principal and interest the right loan for you considering that interest-rates are now at all time lows? Sometimes it can be worth paying more now to save money later. Paying down as much as you can off the loan principal now could mean that when interest rates do rise, you will be paying those higher interest rates on a reduced loan amount. Of course, a reduced loan size could mean lower loan repayments and/or paying less interest in the long-term.

Ask us if an interest-only home loan could help you to achieve your goals.

As your professional mortgage and finance brokers, we know about the pros and cons of all home loan and finance products. We’re here to help you understand the different financing options available and give you expert advice on how you can be clever about applying them to help you achieve your goals. Everyone’s personal financial circumstances and goals are different and you can be sure we’ll take the time to listen and understand what you want to achieve. If you’re considering using an interest-only home loan, please get in touch. We’ll help you decide if it’s the right option for you.

Last month, the Reserve Bank of Australia (RBA) appointed a new Governor, Dr Philip Lowe. After his very first meeting as the RBA Governor, Dr Lowe announced the RBA would be keeping the official cash rate on hold at 1.50 per cent during October. But everyone was well ahead of Dr Lowe’s announcement after he made comments to the press about the lack of effectiveness of further rate cuts in stimulating economic growth when he was first appointed in September.

The RBA last cut rates in August, bringing the official cash rate to all-time lows. However the cut did not have the desired effect of reducing the level of the Australian dollar against other currencies that the RBA intended. Analysts now appear to be undecided regarding the prospect of further rate cuts this year and the RBA is taking a wait and see attitude before indicating its next move.

Spring is traditionally the busiest time of the year in Australia’s property markets, however Grand Final Weekend slowed the market for the last week of September, particularly in Victoria where there were only 133 scheduled auctions for the week ending October 02. However these auctions did achieve a very high clearance rate of 92%. The NSW market was a bit more active with 628 auctions achieving a clearance rate of 80%.

Elsewhere around the country, the QLD market had a lot of activity with 253 auctions, but the clearance rate was very low at just 36%. SA scheduled 47 auctions with a clearance rate of 75%, ACT had 50 auctions with a clearance rate of 72%, WA had only 15 auctions with a clearance rate of 33%, NT held 14 auctions with a clearance rate of 23% and Tasmania had only 5 auctions with a clearance rate of 25%.

With increased activity in the Spring property market, home values are also on the rise in most markets. Sydney saw a rise in home values of 0.81% for the month of September, Melbourne saw a rise of 2.30%, Brisbane/Gold Coast rose 0.22%, Adelaide rose 2.11%, Canberra 2.38% and in Hobart home values also rose by 0.14%.

In the north and west of the country, home values have been trending downward during the first 10 months of 2016. Darwin’s home values fell by 2.21% and Perth’s by 2.37% during the month of September alone. It should also be noted that rental rates are also showing a downward trend in these markets.

Interest rates are currently at all-time lows and following the RBA rate cut in August, lenders are offering some great deals for all kinds of property buyers. If you’re considering purchasing a property or refinancing an existing home loan, it is a great time to see us to discuss your plans or get loan pre-approval. If also a good time to talk to us if you’ve been considering a switch to a fixed rate product to lock in a low rate for a fixed term. Whatever your financing needs we’d love to help, so please get in touch today.

For some, it can be a very anxious time and it’s easy to understand why you might try to avoid the stress of doing it again for as long as you can. However, sticking with the same loan for too long can be a mistake. In this article we talk about some of the benefits of refinancing your mortgage and some of the strategic reasons why you should regularly consider making a switch.

#1. It pays to change with the times.

Mortgage products can become outdated very quickly and it’s important to check regularly to make sure your home loan product hasn’t become a bit of a dinosaur. It really can pay to take the time just to see what’s out there in terms of mortgage features.

Some products offer features that could save you money outside of your mortgage. For example, fee free transaction accounts or low-rate credit cards. Other mortgage products may offer rewards, incentives or even more flexibility. Or perhaps you could be benefiting from more features on your home loan like the ability to make extra repayments and redraw them if you need to, or an offset account that helps you maximise your savings and saves you money on interest.

#2. Minimise your interest bill.

Interest rates also change frequently, with lenders making adjustments in response to economic influences, RBA rate movements and policy directives from industry bodies such as the Australian Prudential Regulation Authority (APRA). And smaller lenders and new lenders in the market place often offer lower interest rates than the big banks, just to attract new business. So it really does pay to compare your interest rate against a range of other options from time to time.

A recent study showed that borrowers who held the same home loan for more than ten years could easily have paid thousands more in interest than borrowers who monitored their interest rate and switched mortgage products every two to three years. You might wonder how that can be true but consider this, if you have a $500,000 mortgage and can manage to reduce the interest by just one percent, over 30 years you could save $100,000 in interest repayments. Switching regularly could potentially help you achieve results like these for yourself.

#3. Capitalise on rises in home values.

The interest rate you may be eligible to receive depends on a number of different criteria and these can change over time. A great example of this is your loan to value ratio (LVR). Your LVR is calculated by dividing the amount of your home loan by the current value of your property. (This is effectively a measure of how much equity you have in the property.)

Generally speaking, the higher your LVR, the greater the risk to the lender and that’s why they usually apply a higher interest rate to loans with an LVR above 80%. As you make your regular home loan repayments and the value of your property grows over time, your LVR constantly improves. If your property has risen in value or you have made significant headway on paying down your loan, you could find your LVR has improved considerably and you could now be eligible for a better interest rate.

#4. Maximise improvements to your circumstances.

An improvement in your personal circumstances could also make you eligible for a better interest rate. Perhaps your credit score has improved over time. Maybe you have had a significant salary increase since you purchased your home, or you have paid off other debts and loans and your financial commitments have been reduced.

Everyone’s circumstances are different and there are lots of ways that time can cause them to change. A consultation with your mortgage and finance broker will soon reveal how any changes to your personal circumstances may influence your interest rate on a new loan.

#5. Make your investment work harder for you.

Purchasing a home can be a very emotional experience and it’s easy to forget that your home is more than just the cosy haven where you live. It’s a valuable asset and an important investment that can help you build wealth.

When you pay down your mortgage and at the same time, the value of the property increases, you build equity in the property that you may be able to access by refinancing. You can use these funds to invest in another property, make another form of investment such as stocks and shares, or to increase the value of your home through renovation. These are just some of the popular wealth building strategies that refinancing can help you to achieve.

Another way you can use refinancing to save money on interest and improve your financial situation is by consolidating your debts. The interest rate you pay on your mortgage is the lowest interest rate available – much more attractive than the interest rate offered on credit cards, car loans, personal loans and store credit.

If you’re interested in refinancing your home loan, just give us a call. We’ll help you decide if it’s the right move for you and work out the numbers to ensure the costs don’t outweigh the benefits. We’ll also help you to find a new loan that has the right features for your needs and offers you the best interest rate available for you considering your current personal financial circumstances. Call us today.