With the property market becoming more valuable, there are more and more strategies becoming more popular. I think some of the readers of this blog, some of these strategies might come in handy to give some options of getting in and ahead.

Lease option sales were popular financing instruments in the late 1970s and early 1980s. They were primarily used as a way to circumvent alienation clauses in mortgages. Proponents claimed the sale was not really a sale because it was a lease; however, courts argued otherwise.

Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a real estate lawyer. The information below is an overview and is not meant to be construed as legal advice.

Basics of an Option

• Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial or as little as $1.
• Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the option.
• The term of the option agreement is negotiable, but the common length is generally from one year to three years.
• Option money is rarely refundable.
• Nobody else can buy the property during the option period.
• The buyer can sell the option to somebody else.
• If the buyer does not exercise the option and purchase the property at the end of the option, the option expires.
• The buyer is not obligated to buy the property.

Basics of a Lease Option

• Buyer pays the seller option money for the right to later purchase the property. The lease option money may be substantial.
• Buyer and seller may agree to a purchase price now or the buyer may agree to pay market value at the time the option is exercised. It is negotiable. However, most buyers want to lock in the future purchase price upon inception of the lease option.
• During the term of the lease option, the buyer agrees to lease the property from the seller for a predetermined rental amount.
• The term of the lease option agreement is negotiable, but the common length is generally from one year to three years.
• The option money generally does not apply toward the down payment.
• A portion of the monthly rental payment typically applies toward the purchase price.
• Option money is rarely refundable.
• Nobody else can buy the property during the lease option period.
• The buyer generally cannot assign the lease option without seller approval.
• If the buyer does not exercise the lease option and purchase the property at the end of the lease option, the option expires.
• The buyer is not obligated to buy the property.

Basics of a Lease Purchase

• Buyer pays the seller option money for the right to later purchase the property. This option money may be substantial.
• Buyer and seller agree on a purchase price, often at or a bit higher than market value.
• During the term of the option, the buyer agrees to lease the property from the seller for a predetermined rental amount.
• The term of the lease purchase agreement is negotiable, but the common length is generally from one year to three years, at which time the buyer applies for bank financing and pays the seller in full.
• The option money generally does not apply toward the down payment.
• A portion of the monthly lease payment typically applies toward the purchase price.
• Option money is nonrefundable.
• Nobody else can buy the property unless the buyer defaults.
• The buyer typically cannot assign the lease purchase agreement without seller approval.
• Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.
• The buyer is obligated to buy the property.

Doing a Lease Option / Lease Purchase

Hire a real estate lawyer to draw the documents and explain your rights, including those of possession and default consequences. The property might be encumbered by underlying loans that contain alienation clauses, giving the lender the right to accelerate the loans upon sale.

Sometimes sellers give the option money to their real estate agent as full payment of commission. Agents are not always involved in the exercise of lease options or fulfillment of lease purchase agreements and, even if you have retained real estate agent representation, you still need a real estate lawyer. Agents are not lawyers and cannot give legal advice.

In the event of a lease purchase, obtain all the disclosures and do your due diligence just like you would on a regular sale. This means:

• Get a home inspection.
• Examine the title policy.
• Obtain an appraisal.
• Read seller disclosures.
• Consider obtaining pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors.

Lease Purchase Benefits for Sellers and Buyers

Lease purchase agreements are commonly offered by sellers of hard-to-sell properties. Think about it, if the property was easy to sell, the seller would sell it to a conventional buyer who would pay the seller cash.

• Sellers generally get market value at today’s prices and relief from paying a mortgage on a vacant property.
• Although the lease payments may exceed market rent, the buyer is building a down payment and banking that the property will appreciate beyond the agreed upon purchase price.
• Buyers generally make a small down payment, with little or no qualifying, making a lease purchase an attractive way to ease into the benefits of home ownership.
• Buyers also receive a forced savings plan since part of the lease payment is credited toward the purchase price at the end of the lease option agreement.
• If the buyer defaults, sellers do not refund any portion of the lease payments nor the option money and may retain the right to sue for specific performance.

For more information, contact a real estate lawyer.

By Elizabeth Weintraub, About.com Guide

The First Home Owners Boost, which was introduced in October 2008, came to an end on December 31 but there is still assistance for first-home buyers. The $7000 First Home Owners Grant (FHOG) remains in place and most of the states and territories have additional benefits.

If you are buying or building your first home you can still apply for grants of $10,000 or more and transfer duty concessions worth thousands of dollars.

The FHOG is administered by state and territory governments and has been available since 2000. The Boost meant that for contracts made between October 14, 2008, and September 30, 2009, first-home buyers purchasing established homes would receive a total grant of $14,000 and buyers of a newly constructed home would receive a grant of $21,000. The Boost was wound back progressively, so that for contracts made between October 1, 2009, and December 31, 2009, first-home buyers purchasing established homes would receive $10,500 and buyers of a newly built home would receive $14,000.

On January 1 the Boost was cut out altogether. Grants reverted to the old FHOG scheme plus any additional state or territory supplements.

FHOG works the same way in each state and territory and applies to houses, townhouses and apartments. Supplementary schemes have rules that vary from state to state.

NSW

In November 2008, the NSW Government introduced a $3000 supplement to go with the Boost, available for first-home buyers purchasing a newly constructed home.

First-home buyers in NSW could receive a benefit of up to $24,000.

The supplement remains in place until June 30 and, combined with the $7000 FHOG, first-home buyers purchasing a newly constructed home can apply for a total benefit of $10,000.

After June 30 the only grant available will be the $7000 FHOG - available for buyers of established and newly constructed houses.

There has been a cap on the FHOG since January 1 this year. The home purchase must be for less than $750,000.

The NSW Office of State Revenue also offers a scheme called First Home Plus. First-home buyers can apply for an exemption on transfer duty on homes valued up to $500,000 and concessions on duty for homes valued between $500,000 and $600,000. The duty on a $500,000 home is $17,990. The NSW Government paid $1.7 billion of first-home benefits last year.

Details at osr.nsw.gov.au.

VICTORIA

Victoria’s State Revenue Office has a First Home Bonus scheme that is available until June 30 and offers $11,000 on top of the $7000 FHOG for first-time buyers purchasing a newly constructed home and $2000 on top of the FHOG for purchasers of an established dwelling.

Victoria also has a Regional Bonus scheme operating until June 30.

First-home buyers can receive another $4500 on top of FHOG and the Home Bonus scheme if they buy a newly constructed dwelling in a regional municipality.

Victoria has exemptions from land transfer duty. If the home is the principal residence and the purchase price is below $440,000, the rate of duty falls from 6 per cent to 5 per cent.

If the price is between $440,000 and $550,000, the concession is a flat $3100.

Buyers who entered a contract after May 6, 2008, are eligible for both the bonus and the transfer duty concession. Details at http://www.sro.vic.gov.au.

AUSTRALIAN CAPITAL TERRITORY

The ACT Government has a scheme called Home Buyer Concession, which offers concessions on transfer duty for dwellings with a dutiable value of up to $422,000 and vacant land with a dutiable value of up to $233,300. There is an income test for eligibility, which starts at $120,000 and increases to $136,650 according to the number of children in the household. First-home buyers can also apply to defer payment of their duty for up to five years.

Details are at revenue.act.gov.au.

QUEENSLAND

First-home buyers can apply for transfer duty concession. The concession is weighted in favour of properties with lower values. A duty rate of 1 per cent applies for homes worth up to $350,000. Buyers can expect a saving of about $8750 on a purchase of up to $500,000. Details at osr.qld.gov.au.

WESTERN AUSTRALIA

First-home buyers in the west can also apply for duty concessions. The arrangements are relatively generous. There is no rate of duty on a home with a value of up to $500,000.

Details at http://www.dtf.wa.gov.au.

SOUTH AUSTRALIA

In 2008 the SA Government replaced a duty concession scheme with a First Home Bonus Grant. Buyers who qualify for FHOG can apply for the bonus. The additional payment is $4000 on dwellings with a market value of up to $400,000. The value of the grant is reduced by 48 cents for every $100 of value in excess of $400,000; the grant is reduced to zero when the value of the dwelling reaches $450,000.

Details at revenuesa.sa.gov.au.

STATES AND TERRITORIES

Each has different eligibility rules covering occupancy and how concessions will be applied if the home is a joint purchase.

PD

An interesting story in News today about the promising property cycle in Australia. This is not just a property spruik, but contains some great ‘facts’ about why this is the case. Like I’ve been telling for quite a while, now is the time to invest for the long term. The wealthy of tomorrow are the ones who acted at this time in history, but ONLY if you are financially able to do it (and stick to the investment rules of location).

AUSTRALIA’’s property sector is about to catch a wave but homeowners and investors do not need to worry about a wipe-out.

While a bubble in the first home owner segment of the housing market is set to burst with the winding back of government grants in two months, industry experts say investors will fill the breach.

They don’t expect the property market to follow the big slumps felt in Britain and the US, where prices have fallen by more than 20 per cent.

In the US, in particular, the problem is too much supply and not enough demand.

“Fundamentally, America has 1.1 million properties in oversupply,” says Damon Nagel, the managing director of property investment  company Ironfish.

“In Australia, it’s more than 180,000 in undersupply. We can keep building for 18 months and only catch up to demand.”

But the buyers of property are expected to increasingly be investors, rather than owner occupiers, once the Federal Government First Home Owner Grant starts to wind down from September 30.

“I think you’ll find first home buyers next year will be like rocking horse droppings – few and far between,” Nagel says.

Professionals Real Estate Group agency principal Claudine Deneuve says buyer inquiries have risen as people realise interest rates are unlikely to fall further.

She’s expecting investors to return to the market as first home owner activity falls in coming months.

“House-price growth will be fairly moderate, with a much slower global economy,” Deneuve says.

“We have avoided the 30-40 per cent drops of the US and UK because our economy was in far better shape than our peers at the start of this historic global recession.

“If the global recession drags out too long, Australia’s economy may become at risk.”

A report released last month by forecaster BIS Shrapnel says conditions are ripe for a sustained recovery in residential property prices.

“Low interest rates, solid growth in rents and housing shortages are evident in most markets,” the report says.

But not everybody believes the outlook is for growth.

Morgan Stanley chief economist Gerard Minack says Australian residential property remains expensive “and will likely prove to be a poor medium-term investment”.

“Whether there are big price declines will depend on employment,” he says.

“In markets where employment and incomes have taken a big hit . . . we have seen big price declines.”

But some do not think prices will drop while houses are still in short supply.

“Demand stems from population growth,” .

“With 190,000 migrants coming into Australia, there’s a shortage of housing, and people need accommodation.”

Some industry names say now is a ‘‘once-in-a-generation opportunity” for investors.

“It’s probably a good time to buy in the right spot, but be careful,”.

PD

I get many articles passed along my desk form a variety of different fund managers and insurance companies. This article is taken from a news release from Vanguard Investments that I’m sure you will find interesting as I did.

Lessons learned from a tough year

After a financial year that most investors would want to forget, a worthwhile exercise is to ask what has been learned.

Perhaps most crucially, investors have been unequivocally reminded during 2008-09 about why some of the most basic principles of sound investment practice make a lot of sense.

When the economy is strong and sharemarkets are rising, some of these straightforward principles are overlooked. And it can take a bear market and economic woes to bring them back into stark focus.

Here are just a few of the principles to be truly reinforced over the past 12 months:

Keep it simple. Many investors lost a lot of money in 2008-09 by being involved with complex investments that they could not really understand. If an investor can’t comprehend how an investment operates, the message often repeated by the likes of the Australian Securities & Investments Commission (ASIC) is clear: stay away from it.

Keep investment and personal debts under careful control. We have heard scores of extremely sad stories over the past year of older couples borrowing against the equity in their homes to invest in shares that were, in turn, heavily geared. This double-jeopardy approach to gearing truly exposed these investors to the full impact of the bear market. It provides an extreme lesson to all of us about the dangers of excessive debt.

Gearing works both ways. This ever-green lesson is linked to the previous point. The fallout from the bear market has been a telling reminder that while gearing can magnify gains in a rising market, it can do the opposite in a falling market.

Act your age. Many older and inexperienced investors were among the numerous investors who had become caught up with the euphoria of once-rising share prices and overlooked the need for the most-appropriate diversification of their overall investment portfolios. As good financial planners often remind their clients, the diversification of a portfolio should reflect an investor’s personal circumstances which include such factors as personal tolerance to risk, investment horizon, age, and expected years until retirement.
Look to the longer term. Particularly when the sharemarket becomes highly volatile, investors are vulnerable to over-reacting to day-to-day news and market commentary. Investors who concentrate on the longer term usually try to block out much of this daily “market noise”.

The 12 months ahead will set particular challenges for investors. Some cashed-up investors, who may be more optimistic about the prospects for share prices, may attempt to time their way back into the market – by trying to pick the best time to buy. Market timing is something that even seasoned investors rarely get right.

Financial planners often recommend that their clients “drip-feed” large amounts into the market progressively over an extended period rather than investing a large amount at one time. This is a form of dollar-cost-averaging.

Another challenge will be how investors react to the cutting back of the caps on concessional superannuation contributions – which include salary-sacrificed contributions as well as personally-deductible contributions by the self-employed and eligible investors without employer super support. The reduction in the caps may encourage some investors to increase their gearing of non-super investments without fully acknowledging the extra risks involved.

So, like I always say, make sure you know as much as you can about where your money is invested and research, research, research.

PD

Just when you thought Google has invented everything to do with search, and online activity, they add some more things to their Google Maps application. Now property investors can quickly check out a property’s location, rent, property type and real estate agent.

All these criteria can be searched through a filter of these criteria to help you find the perfect investment property or your new home.

As always, you can also check the street view to have a look at the actual house or street. This is especially handy if you are buying properties interstate or overseas, as many people are doing now.

By clicking on a marker (circle) provides all the information you will need, such as the agent and their details and website.

If you are a Real Estate Agent, it can also be used to link on your website for people to look at, which can be a valuable marketing tool, and of course, helpful with your SEO.

Good luck finding that new property!
PD

Your next property purchase could be a steal if you adopt the right approach and get ready to take a shot when it raises its head.

Some say that at this time in history, lie no other, those who invest wisely and deeply in carefully selected assets (not too risky - due diligence remember) will be the next ‘Rich’ over the coming decade. So, to give you a help along, below there are 12 ways to help push the property purchase in your favour.

1. Look for an eager vendor

A vendor under distress is the most obvious component of a cheap purchase. There is no moral high ground here- often it’s a case that the seller needs a quick disposal and is willing to cut back on the price in order to move the bricks and mortar on. While it is not pleasant to see another party in a sticky situation, you may be doing them a favour by relieving them of the property, and in most circumstances, it is a business transaction where if you don’t, someone else will.

Ben Anderssen is the director of Brisbane based buyer’s agency Property Chase and is on constant lookout for property bargains for his clients. He often finds his best source of information to be the sellers own representative.

“If you quiz the agent you will get to the point where they’ll start telling you perhaps a bit extra…  And you can’t forget that agents, despite everything else, are there to do a deal. You’ll be able to tell pretty quickly whether or not they’re in a hurry to sell,” says Anderssen.

Some eager vendor situations include:

Vendor has bought elsewhere -Gun-shy buyers will contract on one home before selling their current abode and will include a “subject to sale” clause in the dealings. As settlement draws near, they become eager to dispose of their old property and now is the time for you to leap. Drive hard on the bargain - particularly when you’re armed with a cash contract free of conditions.

“I spoke to an agent the other day and he said ‘It’s a young couple that owns this property and they have bought another house and have bridging finance’ and I just thought “Oh my god, this is perfect,” recalls Anderssen.

Divorce Settlement - No-one enjoys seeing these situations come to a head but the end of a relationship is often punctuated by cutting ties and the settling of assets. Even where the separation is amicable, there is often an eagerness to move on and this means disposing of assets at a quick sale price. The effect can be amplified in acrimonious endings where both parties are eager to severe ties as quickly as possible.

Mortgagee sale - Costs of living pressures, interest rate rises, spiraling petrol prices - all catch phrases that have put further stress on those trying to service a mortgage and keep their head above water. Unfortunately an overextended buyer may receive an unwanted knock on the door from the financier looking to recoup their loan. While watching for a “Mortgagee in Possession” sale is one strategy, the other is to seek out an owner trying to consolidate their assets and settle their loan.

Deceased Estate - In the situation where property is willed to the next of kin, there may be many recipients to consider. While this is sometimes a sticking point, it is common for family member to agree that a quick disposal of the property will help put the estate to rest. Another consideration when multiple beneficiaries are involved is that the value of their share becomes diluted so any reduction in the offer can appear minor. For example, a $500,000 home divided between four siblings will reap $125,000 per share. If a cash unconditional offer of $460,000 is forwarded, a $40,000 saving to the buyer means each sibling now gets $115,000 - not too dramatic a fall in the scheme of negotiations.

2. Get Smart

Fore armed is fore warned. When a bargain arrives, the first buyer to spot it will be the victor so if you don’t recognize the gift horse when it arrives, someone else will ride off with it.

My first purchase occurred in inner Brisbane in 2003. After months of researching the market, I was sure a dated 2 bedroom unit with lock up car accommodation could be located for under $180,000. Despite agent’s reservations about such an animal existing, I received a phone call from one local realtor informing me that something had come onto the market “just yesterday”. He first called the out-of-town lady at the top of his possible purchaser list that was keen to find a Brisbane base for her student daughter, but she had baulked at the $145,000 asking price. Within three hours we had arranged to meet at the unit and, armed with an intimate knowledge of the market, I suggested he bring around a standard contract of sale at the asking figure. The contract was signed on the kitchen bench within the first half hour of the inspection. The body corporate manager told me later that the Gladstone based couple who sold it were delighted to get $145,000 for it. My response - “That’s great because I was delighted to pay $145,000 for it”. The end result is that after $30,000 worth of renovations the unit was worth approximately $210,000 and now five years later is around the $340,000 mark.

Know your market. Set your criteria about what you want and get informed. If you know that your next investment is to be a four bedroom, two bathroom, double garage renter in outer Melbourne, get real about what they sell and rent for. Dig, dig, dig so you become the local expert. When the right property comes along, you might be surprised to find that both the vendor and your competing buyers have scant idea as to what a great deal the property offers.

3. Be Prepared

Take a leaf out of the scouting book of bargains. Get ready to break the tape and be first across the line. By taking care of a few of the basics, you can remove uncertainties and move quickly.

Arrange your finance before you start hunting your prey. Know how much you can afford to borrow and get it organised. Now is the time to shop around for finance, not when your unconditional day of reckoning is imminent. Also, go through the exercise as to what sort of rental you need to achieve on your investments to help service the loan. This is an important step that can stop a prospective buyer in their tracks if they haven’t taken the time to consider the return on the investment.

Form a relationship with professionals whose help you’ll need when snatching a deal. Most valuers are happy to discuss generalities of how they view their areas of expertise and can stand at the ready to provide their services quick smart when they know you are likely to call. Similarly have the number of your trusted pest and building inspector handy so they can provide a ready to go service when you come up with a possible winner. By making their acquaintance early you can get some pre-purchase heads up on possible pitfalls that might surround your sale of the century.

4. Raise Your Profile

In the real estate game wallflowers don’t get dances. Once you know what you want, what it should cost and where it’s located, get out there and get known. Most agents keep tabs on buyers who are serious and ready to jump in their area. For an agent, a smart, cashed up purchaser who can be quickly married up to their perfect property partner saves headaches, puts money in the bank and helps forge an important professional relationship.

Good agents keep buyers phone numbers handy and know who to call first when the right piece of real estate comes along. Don’t stop at one call - ring all the agents in your area regularly to check up on possibilities - let them know you’re out there and they’ll let you know what crosses their desk. A word of advice though - be serious. Time wasting purchasers get short shift from busy agents.

5. Look for the angles

Bargains are not always obvious and you must dust off a little dirt to find the gold seam. Try thinking outside everyone else’s square to see if you can make a go of a property possibility. For example, one agent in a near university suburb has built a formidable self-funding rental portfolio by identifying homes where additional bedrooms can be created for leasing on a per room basis to the student market.

It is also worth considering whether a property holds a value to you over and above the local market. Perhaps by purchasing your neighbor’s home you may suddenly find yourself with a potential development site ripe for rezoning to units - all for not much more than the cost of a standard residential dwelling.

Bargains may also be had by considering other angles for savings. Purchasing a home from a family member or buying the property you currently rent may circumnavigate the need for agents thus saving on commission. In the latter case you may also come to an arrangement where you are compensated for upgrades you have carried out on the property yourself.

6. Look for growth fundamentals

He who hesitates is lost when it comes to areas with all the elements of a future upside. Are there major industries or transport routes likely to boost a suburb’s profile? Perhaps a new bridge will drop potential tenants right at the door of a workplace or perhaps the local university is expanding its overseas student programme. If you are sure it’s worth a punt and can handle the risk, try your hand and there may be a pot of gold at the end of the rainbow.

7. Buck the market trend

Noticed that things have slowed in the area? Is everyone looking a little sheepish about property despite all the fundamentals being in place for plenty of positives? Are there fewer people at the auctions with even fewer competitive bidders?

Hello! Now is the time to put your hand in your pocket.

“There are great buys on the market now and no-one is touching them. I’ve got all these clients at the moment who want to watch the market for six months before committing and I’m like ‘You know what - everyone is holding back, and all of you are going to hit the market in six months and compete with each other!’ The time to jump is when everyone else is hesitating,” says Anderssen.

8. Stick with the basics

Bargains aren’t bargains if things go sour easily. Avoid main roads and adjacent rail lines. These things don’t sell in a soft market. The rule is a window of opportunity comes around to sell a dud property about once every seven years so avoid them like a biblical plague.

9. Beauty is skin deep

See beyond the façade and look for good bones. Michelle turned up at an open house to find her unit of interest was inhabited by some very disgruntled tenants.

“They obviously weren’t pleased that they were being kicked out and that the open house was on their Saturday morning. The stereo was turned up loud, they had collected about 50 empty toilet rolls around the pedestal and they even started shifting out a filthy mattress down the hallway past prospective buyers. The place was a pigsty,” she recalls.

“Plenty of people turned up their nose at the state of the property but all I could see was the massive size of the bedrooms, plenty of light from the numerous windows and the hidden surprise of a huge downstairs store room,” she adds.

Hers was the only offer of the day at $192,000. A new coat of paint, kitchen and floor coverings plus some general dressing with drapes etc. and Michelle had turned the hovel into a cool near city crash pad worth $250,000. Not bad in six months.

10. Work the conditions

“Quite simply, the less conditions you have in a contract, the more the vendor’s going to favour that contract,” says Anderssen.

By reducing the unknowns you can keep a step ahead of the competition. Don’t put yourself at risk but if there are instances where you can safely take out the finance clause, waive the cooling off period or forget about building and pest inspections then you could well find your self a step ahead of the competition.

“The more favourable you make that contract the less you’ll have to pay if say you’re up against somebody who wants to extend the settlement period or make it conditional upon getting something through Council or whatever,” adds Anderssen.

With this approach it can pay to ask the agent what the buyer wants in the contract. If you are flexible with your requirements and cater to theirs, it might swing the deal in your favour.

11. Look for out-of-area agents

There are instances where sellers are represented by agents who don’t know the area. They might be family friends or a long term business associates who the owner trusts with their valuable asset. While in most instances a professional agent will do their research, there are occasions where an overworked agent has taken on a listing beyond their specialty. Unfortunately for the seller, there is little substitute for local knowledge.

Keep an eye on the listings to see if agents and areas are mismatched. Sometimes an underdone internet listing or unconvincing newspaper advert can be a heads up that the agent doesn’t know his stuff in the suburb. See if you can read a little deeper.

12. Long listing can equal big savings

An overconfident vendor can be their own worst enemy. In most markets, appropriately priced properties sell within a reasonable time frame. When markets are rising, sellers may confidently list there investment at a price above the local market and wait for it to catch up, but when things stagnate these properties will sit and if the seller isn’t flexible, they will burn off potential deals.

If you feel a property is overpriced, keep an eye on it. If the market isn’t particularly hot and you start seeing the home appear week after week with no joy, particularly if the list price keeps reducing, try your hand. The frustrated home owner may just feel the need to get the darned thing over and done with.

There are no guarantees in the property game but you can help make your own luck. The strategies above, particularly in combination, can give you the firepower needed to get a steal.  Lay the bait for bargain, keep a keen ear to the ground and you may just throw your net over the deal of a lifetime.

Have you had success by implemeting these and other tactics?

PD

After the headache of getting all of your payments in on time for end of financial year, now comes the headache of getting all of your deductions together to find out what exactly can you claim.

One such area is investment properties. This form of investment has proved very popular over the past 5-10 years with property prices on the up, so the majority of readers will have some form of property investment. One thing that many of us miss out on, is legitimate claims on items such as depreciation (but this is generally due to a lack of a depreciation schedule prepared by a professional) and smaller items.

Defence Housing of NSW has put together a great article which outlines the important aspects of generating the most from your deductions, with the help of the ATO, so it ‘must’ be true (until they change the rules again). So if you have an investment property, take note as this will be valuable information straight from the horses big mouth.

The Australian Taxation Office’s (ATO’s) Assistant Commissioner, Megan Yong, provides an overview for rental property owners of the “do’s and dont’s” of claiming deductions.

‘Last year more than 1.4 million people claimed over $25 billion in rental deductions in their tax return. Over 200,000 of these people were claiming deductions for the first time,’ Ms Yong said.

With so many people claiming deductions the ATO is continuing its focus in this area to ensure property investors get their claim right.

‘This year the ATO will write to around 110,000 people who have purchased rental properties in the past 12 months with advice on claiming rental property deductions,’ she said.

Here are a few things Defence Housing Australia (DHA) investors should think about when claiming deductions in their 2008-09 tax return.

What you can claim as an immediate deduction

‘There are a number of rental property expenses that can be claimed as an immediate deduction,’ Ms Yong said.

These include:

• interest on a loan to:
  - purchase a rental property or purchase land to build a rental property
  - purchase a depreciating asset for the property like an air conditioner
  - finance renovations like a deck
  - make maintenance repairs or repair damage to the property.

What needs to be claimed over a number of years

‘Expenses that are deductible over a number of years include most borrowing costs and the cost of depreciating assets and structural improvements,’ Ms Yong said.

Borrowing costs can include:

• stamp duty charged on the mortgage
• loan establishment fees, fees for a valuation required for loan approval and lender’s mortgage insurance
• title search fees charged by your lender, costs of preparing and filing mortgage documents and mortgage broker fees.

If these amounts are less than $100 in total they can be deducted immediately, otherwise they are generally deductible over five years or over the term of the loan, whichever is less.

‘Major renovation costs and costs to repair damage, defects or deterioration upon purchasing a property can’t be claimed as an immediate deduction.

‘These costs generally must be claimed as either a deduction for decline in value over the asset’s effective life, or as a capital works deduction over 25 or 40 years,’ Ms Yong said.

What you can’t claim: avoiding common mistakes

According to the ATO website, there have been a number of common mistakes identified in the income tax returns of rental property owners. Below is a list the ATO has compiled of common mistakes to avoid.

Construction costs

Certain types of construction – including extensions, alterations and structural improvements – can be claimed as capital works deductions. However, the land on which a rental property is constructed cannot be claimed. Instead, the land forms part of the cost for capital gains tax purposes.

Deductions can be claimed for the decline in value of some types of depreciating assets in residential rental properties (for example, curtains, blinds, dishwashers, refrigerators, stoves, television sets and hot water systems). However, construction costs are not depreciating assets.

For more information on deprecation, click here to read this month’s Industry insight from quantity surveying firm, Turner & Townsend.

Common depreciation claim mistakes include:

• claiming the cost of the land component as part of the cost of constructing the rental property,
• claiming construction costs as a decline in value of depreciating assets deduction instead of a capital works deduction.

Refer to Rental properties for a comprehensive list of residential property items and whether they are depreciating assets or capital works.

Interest

Taxpayers sometimes use their loan facility for both investing and private purposes—for example, to purchase or renovate a rental property and to buy a motor boat.

The interest expense on the private portion of the loan (the motor boat) is not deductible.

A common mistake is to claim a deduction for interest on the private portion of the loan.

Travel expensesWhere travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. You may be able to claim local expenses that are directly related to the property inspection and a proportion of accommodation expenses.

A common mistake is to claim a deduction for the cost of travel when the main purpose of the trip is to have a holiday and the inspection of the property is incidental to that.

Deductible borrowing expenses

The correct way to claim borrowing expenses of more than $100 is to spread the deduction over five years or over the term of the loan, whichever is less. If your borrowing expenses are $100 or less, you can claim the full amount in the income year they are incurred.

A common mistake is to claim all deductible borrowing expenses in the first year they are incurred.

Ownership interests

If you purchase a rental property as a co-owner and are not carrying on a rental property business, you must divide the income and expenses for the rental property in line with your legal interest in the property. This is despite any written or oral agreement between co-owners stating otherwise.

A common mistake occurs when a property is purchased by a husband and wife (as co-owners) and the income and expenses are not split in line with their legal interest in the property.

Refer to Rental properties for more information on how rental income and expenses should be split between co-owners.

What records do you need to keep?

You need to keep proper records in order to make a claim, regardless of whether you use a tax agent to prepare your tax return or you do it yourself. You must keep records of:

• the rental income you receive and the deductible expenses you pay - keep these records for five years from 31 October or, if you lodge later, for five years from the date your tax return is lodged.
• your ownership of the property and all the costs of purchasing/acquiring it and selling/disposing of it - keep these records for five years from the date you sell/dispose of your rental property.

More information

The ATO website has detailed fact sheets outlining what expenses you can and can’t claim for your rental property,’ Ms Yong said.

These include:

Rental properties – avoiding common mistakes
Rental properties – claiming borrowing expenses
Rental properties – claiming interest expenses
Rental properties – claiming repairs and maintenance expenses
Rental properties – claiming capital works deductions

If you would like to talk to someone at the ATO about tax deductions for rental properties call 13 28 61.

Disclaimer: This information has been sourced from the Australian Taxation Office via the Defence Housing of NSW website, which contains some great information at www.dha.gov.au  DHA property investment is subject to the terms of the lease. DHA investors retain some responsibilities and risks. Investors should seek professional and independent advice.

There are many people trying to sell at the moment, and buyers are becoming evermore ‘pickie’ in what they will pay for a home since the financial crisis has hit. Something that many people fail to do is take an over the top approach to detail when selling their home. This might be because they don’t know what to change, so here are some tips to make your property stand out a little more than the one up the road.

1. Remember, not all buyers can look past a very personal paint color choice and see the potential in a room. Your home will be attractive to more buyers if the walls are painted in a light or neutral color, making it easy for them to picture their furniture in your home.
2. Step 2

   Clean up any dirt or clutter. Nothing turns off a potential home buyer faster than a dirty home. Over time, we may get used to a little mildew on the bathtub caulking, but a buyer will notice it immediately. Also, clean up any dirty grout, countertops, sinks and toilets and give your home a good vacuuming before any buyer viewing.

3. Step 3

   Eliminate any lingering odors (e.g. smoke, food, pets) in your home. Since we live there, we get used to some odors, but a person walking into your home will pick them up immediately. Use fabric freshener on furniture and carpets and mild air fresheners to get rid of the smells.

4. Step 4

   Give your home some “curb appeal” by going around the outside and picking up and putting away any garden tools or bicycles. Keep your lawns and gardens trimmed neatly too, and if the existing paint on your trim and front door is old or faded, update it.

5. Step 5

   Brighten up the interior by cleaning the windows so they sparkle and replacing any burnt-out light bulbs. You could also use higher wattage bulbs to provide more light.

6. Step 6

   Get rid of any clutter in your basement, garage or shed. Clutter sends a message that your home may not be well maintained and is a definite turn off for a buyer. Also, tidy kitchen cupboards, as well as the pantry, and organize your closets. Neat, tidy and uncluttered storage spaces give buyers the impression there is lots of storage in your home, and storage is always a positive.

7. Step 7

   Consider painting an unfinished basement in a light color to make it appear less dark. Adding inexpensive carpeting can also make an unfinished basement more attractive.

8. Step 8

   Clean your appliances. Someone looking to buy your home might look anywhere, so be sure your oven and microwave are clean and there is no old food or food containers in your fridge.

My wife and I have discussed Solar energy for at least 12 months now,  considering we live in a new area, and the next place we plan to move to will involve building again. This puts us in a unique position to be able to direct the builders to link much of our electricity needs to solar, saving a fortune in the long run.

Until last Tuesday, the government was giving Australians a rebate if they chose to go ahead with installing solar energy to run your household. And with atake up of about 80,000 households, this was off to a good start. Why on earth they would cancel such a thing is beyond me! Especially after KRudd and many other vocals about the need for greener energy and government’s help toward becoming greener (because that seem to be the only way this is going to happen anytime soon).

In the news report from news.com.au, several people interviewed had ordered the solar and submitted paperwork for a rebate, but now are being told it has been scrapped if you hadn’t done it prior to a certain date.

After hearing a lot of ‘green’ talk in elections, both her and around the world, it’s becoming harder to understand where they are going with all of this, because it seems they implement one thing, and then in the interests of business, they terminate something that was looking like a success. If they are serious about combating the onsets of global warming, and reducing carbon emissions, they need to start sticking to their word (as hard as that is for pollies) and implement more of these schemes.

But it begs the question – Is it worth going solar? Financially speaking, upfront it can be a bit of a stretch, but if you plan to live in that particular home for a long time, then it definitely has it’s upsides. Plus the fact that you don’t jhave to see an integral energy bill hitting your doorstep ever again.

I decided to delve further into the actual costs of getting solar panels, and how much it would take to run my house. We have a relatively average household of 2 adults and 3 children.

Size & Watts: The cost of a panel depends on the Watts it puts out. Basically, panels are priced usually in dollars per Watt. Basiclaly a 100Watt panel will generate 100Watts of electricity per hour.

One of the hardest factors to determine is your energy usage. This will vary every day. The problem is from day to day, the amount of energy you use is not going to remain consistent; however, you should be able to calculate an average of your energy usage. It is always better to over estimate rather than underestimate.

A good rule of thumb is to first calculate your average daily usage and then multiply that number by .25. This will give you the number and size of solar panels you need in kilowatt-hours. Your electric meter provides you with a very straightforward way of knowing how much energy you are using each day.  Your meter should have either an odometer style readout or a dial type readout.  Your electric company should be able to provide you with instructions on how to read your meter if you are unfamiliar with it.  All you will need to do is record the meter reading and then 24 hours later record the reading again.  This will tell you the kilowatt hours you have used.  You might want to do several readings and average the results you get over a couple of days. Or just work it out from your bill.

Once you have figures out the amount, you need to find the right solar panel. There’s quite a lot of different panels varying from output of Watts and Amps. Generally speaking, it seems like the more expensive they are, the more power they output, which then uses less roof space.

In the end, it will generally take about 15-20 years to pay back the savings of your investment. Depending on your opinion toward climate change will depend on whether you think this is a worthwhile investment.

For me, it’s just a matter of giving government and large organsations les control over what I spend, along with the knowledge that I have contributed less towards the destruction of the place where my children will grow up.
By the way, I’m no greenie and don’t hug trees, but I do think that while we are gifted with a place that has so many things to appreciate that are beautiful, we should at least ‘try’ to do something small. Or in plain English, just give a toss.

Here are some links to help you in your research toward solar energy, and try to write a letter to your local member on the importance of giving us an incentive for doing things such as these.

Have you already installed solar at your work or home?

www.energymatters.com.au
www.gepower.com

PD

So, you need to get rid of your house and you need to do it as fast as possible. Whatever the reason, be methodical, reasonable, and most importantly of all, don’t panic. This may not seem like the best time to try and sell your house your house, but if you follow this sound advice, it is very possible.

I am about to disclose to you the five biggest mistakes homeowners make when selling their home. I’m also going to address some proven home-selling tactics that will assist you in selling your home fast.
The Top (5) crucial mistakes impatient homeowners make
1)    Making small price reductions over and over
Nothing indicates desperation more than multiple incremental price drops. The longer a property continues to remain on the market, the more enabled the buyers become. Instead, research the market value yourself. Find out what your house is worth by looking at similar properties in the neighborhood and price it well below them. The most looked at houses on the market are the newest and the cheapest. If there is a way that you can come in first in both categories, you will more than likely have yours under contract in a very short amount of time.

2)    Hiring the cheapest but not the best Real Estate Agent or Broker
There are many ways of finding a good Real Estate Agent. Personal recommendations from friends and colleagues are often one of your best sources. Top notch Real Estate Agents charge a premium for their services, and rightfully so. So don’t sign up with cheapest Real Estate Agent and get stuck with a lemon. You want someone with experience, personality, enthusiasm and drive, and most importantly, someone who will give you the attention you need and ultimately guide you and your potential buyers through the entire process with courtesy and professionalism.

3)    Waiting for a better market
Good luck. If you decide to wait, you are joining the ranks of the other million homeowners who have also decided to wait. Trust me, when everyone decides to sail at the same time, you are probably too late, and have already missed the boat. If you need or want to sell now, then by all means, sell now. There will never be a better time than the present.

4)    Showing your house before you get rid of your stuff
You would not try to sell your car without first washing it and vacuuming it out, would you? Let me make it perfectly clear. When it comes to all of your stuff that you have collected over the last thousand years, trust me, it may be your prized stuff, but everyone else sees it as junk. Trying to sell your house when it is full of junk is definitely a bad idea. Potential buyers will not see charming family memories; they will see an overcrowded house that appears smaller than it actually is. Your potential buyer does not want to see your house; they want to see their house.

5)    Do not be over confident
The seller gets a few showings early on and they are suddenly filled with courage and confidence. The first offer does not seem so great, so you naturally assume there are bigger and better offers to be had. So with a great amount of confidence, you talk yourself into rejecting the first offer. This is a big mistake. Treat every offer you receive, as if it is your last. If you do not take this advice, trust me, your competition will.
For more information on selling your home, visit Americas Housing Educators at www.americashousing101.org