18 September 2017
Buyers are often sellers too. Most people who decide to sell their home also look for an alternate property at the same time and it’s not uncommon for them to find something appealing before they have secured a buyer of their own.
What is a ‘subject to sale’ offer?
Buying a property “subject to the sale of another property” is common and REIWA agents are well equipped to ensure the sale agreement is procedurally correct.
Normally, these agreements enable the seller to continue to promote their property for sale and, in the event of receiving an alternate offer to purchase (normally not subject to the sale of that buyer’s property), give notice to the first buyer of their intention to proceed with the second offer after two business days.
This colloquially termed ‘48 hour clause’ provides the buyer two business days to obtain an offer on their property or waive the benefit of the subject to sale condition.
What does a ‘subject to sale’ offer entail?
Certainly, these arrangements can get tricky. Agents need to be especially careful not to prejudice the second party by giving the first buyer a hint that a second offer might be on the way. Notices served between the parties must also be technically compliant and strictly adhered to so as to not unfairly advantage either buyer.
A crucial point for sellers to be aware of is if they are accepting a ‘subject to sale’ offer, at say $600,000, this then binds them to that sale price within the 48 hour period – even if a second unconditional offer is higher (provided the original buyer can make their original offer unconditional within the 48 hour time frame).
’Subject to sale’ offers can benefit sellers
Although this type of sale requires more effort, contracts for sale that include the ‘subject to sale’ condition, often succeed and proceed smoothly to settlement.
This type of sale also has the potential to put the seller at an advantage, with the buyer often expecting to pay a premium for the privilege and protection of settling after the sale of their own property.
Given the conditional nature of the sale, sellers are justified in asking for a higher price from the subject to sale offer. There have been instances where the seller rejected a ‘subject to sale’ offer at a premium price, only to have that same buyer return to the same property after they’ve sold and pay a lower price.
I would advise sellers to consider all offers presented to them, including those that are subject to sale. In this market where competition is high between vendors, it’s in your best interest to give consideration to all serious buyers.
29 August 2017
Have you ever wondered how property investors seem to keep buying properties without saving up for years to put down a deposit? It’s because they’re using a tactic called leverage: using the equity generated by the rising value of an existing property to purchase a new one. This property then grows in value, allowing the investor to repeat the process and buy again.
Sounds good in theory, but is it all it’s cracked up to be?
How leverage works
Leverage is a simple concept. It’s borrowing to increase the potential return of an investment. Taking out a mortgage to buy a home is a form of leverage.
Leveraging the equity in an existing property – whether a home or an investment – depends on the value of that property growing while the size of the mortgage reduces or stays the same. For example:
- You buy a property for $400,000, putting down a 20 per cent deposit ($80,000) and borrowing the remaining 80 per cent ($320,000)
- Over time, the property increases in value by $100,000. The 80 per cent mortgage would now only be 64 per cent of the property value – or less if you’re paying off the principal as well as the interest.
- You refinance, increasing your mortgage up to 80 per cent of $500,000. You create a cash pool of $80,000, which can be used as a deposit to buy an investment property
Property investor and mortgage broker Jane Slack-Smith of Investors Choice Mortgages highlights a number of benefits to this strategy.
“Using equity in this way minimises risk by keeping your cash in your pocket – you’re not using your cash reserves,” says Slack-Smith. “It also takes a long time to save cash – say, five years to save $100,000. In that time, property values are likely to increase faster than the interest on your savings.
“By using equity in an existing property, you can get into the market today and buy at today’s prices, benefiting from the coming years’ growth.”
There are risks to leveraging equity to buy investment properties. First and foremost, you have to be certain that you can service all the mortgages you’re taking out, otherwise you could lose some or all of your assets. Researching potential purchases thoroughly is essential to avoiding a bad investment, says Slack-Smith.
“Leveraging equity doesn’t relinquish you of the responsibility of researching before buying an investment property. You should ensure that you have a clear strategy – flipping or buying to hold – as well as ensure you’re buying in a good suburb.”
You could also end up being plagued by cross-collateralisation if you’re not careful. This is where lenders use equity in more than one property to secure the loan. While it may allow you to borrow more in the short term, in the long term it could hinder your empire-building plans.
“Cross-collateralisation reduces your flexibility. If you want to draw out equity from an investment property in a few years, it means the bank may refinance your entire portfolio, rather than just one property.”
Depending on how individual property values have changed, that could mean you’d be unable to access any equity. While cross-collateralised loans can be disentangled, it can take up to six months.
Plan of attack
It’s essential that you plan ahead before you start refinancing. A good mortgage broker should be able to help you with this process.
“It’s important to have a clear initial plan of how you’re going to set out your finances. If you plan to buy two properties, ensure you have enough equity to cover the deposit, stamp duty and buyer’s agent fees for both purchases.”
Slack-Smith recommends setting up individual loan splits against your first property that will only be used to finance the purchasing of further properties. The interest on those splits should also be tax-deductible, as long as those splits are only used for investment purposes. She also recommends setting up the splits as lines of credit, rather than as a conventional mortgage.
“A line of credit is usually a little bit more expensive, but it’s like a big credit card – you don’t pay for what you don’t use. Just be disciplined and don’t use them to finance new cars or holidays!”
Leveraging equity growth in your existing properties can help you build a property empire faster – as long as you set it up correctly from day one and do your research. Otherwise, you could find your portfolio collapsing faster than a house of cards.
14 June 2017
Nicola McDougall via domain.com.au
Whether you’re a homebuyer or a homeowner wanting to refinance, valuations can result in you uncomfortably sweating on that all-important final number.
But, while valuers are professionals who clearly know what they’re doing, are there any strategies to improving your valuation?
Should you highlight every single improvement when the valuer is on-site or is it best to leave them alone so they can get on with the job?
Herron Todd White national director Valuation Tony Higgs says it can be beneficial for owners to be on-site but you don’t want to be over-eager.
“Obviously we’re trying to get as much information as we can while we’re on-site and if the owner is constantly following us around and going, ‘This is the toilet. This is the laundry’, well, those sorts of things we can work out for ourselves,” he says.
“It’s those things that they’ve done recently that they want to point out to the valuer, which is great, and that’s the stuff we want to know.”
For properties that have been recently renovated, Higgs suggests owners mention the improvements at the start of the valuation process and then point them out once the valuer has moved inside the property. Photo: Jessica Shapiro
Highlighting improvements which might be not immediately visible, such as solar panels, is also a good idea, Higgs says.
For properties that have been recently renovated, Higgs suggests owners mention the improvements at the start of the valuation process and then point them out once the valuer has moved inside the property.
Higgs says being on-site during the valuation not only allows owners to provide relevant information to the valuer, it also helps them to understand the process.
Metropole Brisbane Director Shannon Davis meets valuers on-site to point out improvements as well as to provide information about comparable properties. Photo: Peter Riches
“For the owner, it’s always beneficial for them to be on-site because they can get an understanding of what the valuer has done while they’ll out there,” Higgs says.
“If they’re there with the valuer at the time, and if there are issues that they want to raise, that’s the best time to flag them.”
Metropole Brisbane Director Shannon Davis meets valuers on-site to point out improvements as well as to provide information about comparable properties.
And he’s not afraid to challenge a valuation that’s nowhere near his own research.
“There can be some valuations that are way off. We’ve challenged valuations before, especially near the turn of the market,” he says.
“You might have someone who’s just out of the odds who brings it in $20,000 or $30,000 under, but we’re at the market coalface day in and day out.”
One such valuation, Davis says, was a valuer who missed one bedroom entirely and therefore came in about $70,000 below the expected value.
Insisting on an on-site rather than kerbside or desk-top valuation could help to reduce mistakes and also potentially improve the end result, Davis says.
“I think wherever possible, it’s worthwhile to meet the valuer at the property and show them through the scope of works and bring a list of comparables as well,” he says.
“Also (challenging a valuation) might cost a little bit more… but spending money to get access to more money can be really worth it if you’re acquiring an appreciating asset.”
24 May 2017
State Treasurer Ben Wyatt today announced the $15,000 First Home Owner Grant (FHOG) for newly built homes will be cut back to $10,000 on 1 July 2017.
Mr Wyatt said the previous Liberal Government’s decision to increase the FHOG by $5,000 in December last year was not an effective mechanism for stimulating additional construction of homes.
“Given the disastrous state of the finances which we have inherited, we need to remove any ineffective spending.
“Ceasing the boost early will allow the State Government to fund higher priority areas while ensuring Western Australian first home buyers continue to be eligible for generous Government assistance,” Mr Wyatt said.
REIWA analysis shows that the introduction of the grant in January 2017 did little to stimulate activity levels in the new-build market.
At the time of the grant increase, REIWA President Hayden Groves said the Institute was concerned the $5,000 boost would widen the gap between established and newly built properties for first home buyers.
REIWA Councillor Suzanne Brown said now that the FHOG is returning to $10,000, REIWA hopes this will help to even out the playing field, albeit marginally, between the established and newly-built market.
“However, there is still work to be done to help first home buyers purchase an established property as the gap remains significant,” Ms Brown said.
18 May 2017
Author: Rachel Preston-Bidwell via reiwa.com.au
Renting out your property for a reasonable price and turning it into a successful investment can be challenging, especially in the current market. We share some tips on how to make improvements to your home to get a tenant in as quickly as possible and obtain a rent price that works for both parties.
1. Make some home improvements
If your investment property is a little older, it may benefit from some low-cost cosmetic renovations, including:
- A coat of paint
- New blinds or curtains
- Fresh carpets
- Updated/modern light fittings
Freshening up your rental property and repairing any damages can make a big difference to a prospective tenant.
You may also wish to consider installing features such as air conditioning, security screens or an alarm. These types of items can potentially add value to your property and also be an attractive incentive to a tenant.
Read more about the features tenants want in a rental.
2. Consider tenants with pets
Many landlords won’t allow tenants with pets, so those who are willing to be pet friendly are at a particular advantage and can potentially attract a higher rent return.
If you are concerned about a pet damaging the house, talk to your property manager about a pet bond, in addition to your main bond, to cover fumigation costs if required at the end of the tenancy.
3. Speak to a property manager
Property managers have a good understanding of the rental market, including the types of properties in demand in a particular area and the going rent prices.
Speak to a local property manager for recommendations on rent and even about what improvements you could make to your investment property. They can also help ensure you don’t overcapitalise on your rental, by recommending what improvements are sought after by tenants and what to avoid.
If you’re looking to rent out your property, speak to us on (08) 9475 9622 or email firstname.lastname@example.org
03 May 2017
Christina Zhou via domain.com.au
- Worst house on the best street taking up the best spot
- Buying the best or worst house on a block
- Off-the-plan buyers seeing losses and lacklustre growth
Buying the worst house on the best street is a classic real estate adage, but it could be among the worst investment advice for those who don’t do their due diligence.
Crumbling houses being marketed as a “renovator’s delight” or a “blank canvas” may appear to be a bargain or an entry in to the area, but it might also require a buyer with deep pockets to do a thorough update.
Wakelin Property Advisory Richard Wakelin said buyers who purchase the worst house on the best street might need to spend a lot of money on rewiring, restumping, re-roofing or re-plumbling. The property might have “hidden costs” and also unfixable issues such as backing onto apartments or light industrial-type property, he said.
Tax depreciation and stamp duty concessions should not be the main considerations for buying an investment. Photo: Jessica Shapiro
“It definitely falls into the lure of a renovator’s delight, and most people get badly caught out by what they have to do to get the foundations of the actual building right,” Mr Wakelin said.
Some property advisers point to seemingly attractive tax advantages and stamp duty concessions that come with buying off-the-plan, but buyers who overlook other fundamentals could find themselves stumbling into an investment pit hole.
Investor Neda Tesic, 32, was encourage by her ex-partner and a former financial advisor to buy an off-the-plan two-bedroom apartment in Maidstone, about eight kilometres west of Melbourne’s CBD.
High rental yields could mask the property’s scarcity value. Photo: Peter Riches
She sold the property in 2015 for less than what she bought it for in 2008, during which house prices in the suburb took off.
“[They] talked about depreciation and I just took it for what it was, not realising the full story; in terms of how inflated it would be,” said Ms Tesic, who works in sales for an accounting software company. “It was so hard to get tenants in there as well because there were so many other apartments in the area.
“It was a very expensive lesson,” Ms Tesic said, adding that she would now take more time to research and look at comparable sales in the area.
Experts say time in the market is key. Photo: Simon Bosch
Mr Wakelin said many poorly performing properties were marketed with tax advantages as their main selling point.
Tax attractions such as gearing strategies, depreciation allowances and stamp duty savings might assist the financing of an investment in early years, he added, but they should not be the primary reason to invest, because too often they mask the property’s scarcity value and propensity for capital growth.
While some investors try to time the market, many property experts argue it is better to buy when you can afford it.
“Time in the market” rather than “market timing” was the key, but investors needed to do their research very thoroughly, Mr Wakelin said. “Procrastination is the greatest thief of time.”
An investment offering high rental yields could also raise a red flag.
Allen Wargent Property Buyers principal Pete Wargent said the worst investments over the past decade in Australia had been those where people had focused on the rental yields to the exclusion of almost everything else.
Though mining towns offered rental yields of 15 per cent or more during the mining boom until 2012, it reflected the risk in the asset, he said.
“A lot of people have been badly hurt, particularly since 2012, and I think some of the high-profile locations that have been hit have been small mining towns, but even in some larger areas like Gladstone have had some severe corrections.
“That’s probably been the worst advice in Australia over the last 10 years.”
Sydney buyers’ agent Victor Kumar, director of Right Property Group, said one of his bad investments was a serviced apartment he bought in 2009, with the intention of hosting friends and family and using it as a holiday pad.
Though the gross rent could look really attractive, a lot it goes into the letting fee and running costs, Mr Kumar said, adding that serviced apartments were also very seasonal.
12 April 2017
Modified by realestate.com.au
Did you know that the rate of Auctions being sold is now an average of 28 day on the market? Whilst the Perth market average days on the market for Selling via Private Treaty is 76 days. Here at Porter Matthews Metro we have a well thought out Auction process and success rate, if you have queries as to how this method might suit you, please give us a call on 9475 9622 or email us at email@example.com
Read more here why Auctions are becoming more popular in WA.
Perth real estate agents are predicting an increase in the popularity of auctions over traditional offer-acceptance sales in Western Australia, saying auctions could help fuel the state’s dull property market.
Auctions are not typical in Perth and only represent about 3% of the market, but agents and auctioneers say that is changing, with a growing number of vendors favouring auctions over private treaty sales.
CoreLogic data shows the number of auctions in Perth is on the rise, with 1964 held last year, compared to 1692 in 2015. So far this year, there have been 404 auctions in Perth.
First National Druitt & Shead Doubleview principal and auctioneer Rob Druitt says auctions have become more popular because it heralds speedier sales in a slow market.
Druitt says auctions enable the vendor to get a quicker understanding of where their property sits on the market, with the intensive marketing campaign usually spanning 30 days.
“The other important phenomenon is that in this market, the ‘no price marketing’ clearly isn’t working… because the market is driven by price. If your price is right then the market will see value and you’ll get offers.
“Price is the driver in this market. Buyers are looking for value.
“In inner-city Melbourne… 80-90 % of properties sell by auction. In Perth, you’re only talking about 2-3 % of total transactions. It’s a smaller number but it is rising and there’s a number of prominent firms around Perth who are embracing it more and realising the benefits for both the buyer and seller,” he says.
Acton chief executive officer Travis Coleman says the number of auctions in Perth has been on the rise for the past three or four years.
“A lot of people are doing it because we’re moving from a market where there are extended days on market and we’re trying to shorten that and bring the price discussion to a head in a shorter time.
“Auctions are not just limited to the upper end of the market. [Acton Coogee agent] David Bombara is doing it down in Spearwood, the mortgage belt areas, with great success and actually selling quite a few properties prior to auction,” Coleman says.
He says auctions are a transparent property sales technique and generally mean quicker turnaround times, rather than having a property sit on the market for four to five months, or in some areas even longer.
Realmark Western Suburbs director Adam Gilbert says the increased take-up of auctions across Perth was due to the competitive market and shortage of supply.
“What the market wants is transparency. In a market where there isn’t a real understanding as to what is a real price, what is a market price and what is an agent price – the market is saying just give me an opportunity to have a go.
“Auctions are very transparent, very honest, aligned with what the market wants and they do bring urgency not only for the buyer but the seller… to make the best decision in a shorter period of time.
“I think agents in WA need to get in tune with the current market. The market is evolving, the landscape is changing, technology is assisting buyers to gain information in a much shorter period of time so I think we give our sellers the option to consider auctions,” Gilbert says.
But CoreLogic head of research Cameron Kusher says with declining values in Perth it is unlikely that auctions will become more popular in the short-term.
“Auction volumes were a little higher last year than they were in 2015 for Perth, however, auction sales still represent a very small proportion of the overall market.
“Although selling by private sale in Perth is tough, a lot of vendors probably feel as if it is not worth the additional expense to sell at auction, particularly when the success rates have typically been well below 50% this year,” Kusher says.
22 March 2017
Kevin Eddy via Domain.com.au
Deal with caveats and encumbrances early
A major cause of anxiety that can cause settlements to be delayed are undetected legal caveats and/or encumbrances on a property. These must be legally lifted before you can settle.
Ideally, you should aim to buy a property with no caveats or encumbrances upon it in the first place – you can uncover these by instructing your solicitor or conveyancer to carry out a title search prior to purchase, or at the very least before the contract goes unconditional. If anything crops up, your solicitor/conveyancer should instruct the seller’s legal counsel to resolve the issues – or you can simply walk away from the purchase if you prefer.
Make sure the money is in place
One of the most common reasons for settlements being delayed or failing altogether is the funding not coming through. Mortgage approval is usually dependent on the bank’s valuation of the property, which may not take place until late in the buying process. If the valuation falls short, you could be in big trouble.
Results Mentoring property coach and experienced property investor Brendan Kelly says you should make finalising your funding your top priority after signing the contract of sale.
“If you’re on a standard settlement of between 30 and 90 days, get your loan approved once you’ve signed the contract or gone unconditional,” says Kelly. “Make sure it’s all done well in advance of settlement.”
Even better, choose a bank that will pre-approve your loan or accept your evaluation. A mortgage broker can help you find a lender who will do this, as well as help you find the best loan for your circumstances.
Be proactive as D-day approaches
You may have a great conveyancer or solicitor, and the bank may have approved your loan, but you should also take responsibility for ensuring the settlement goes ahead as planned. You should be proactive, albeit not pushy, in ensuring that things are progressing well as settlement date approaches.
Kelly recommends chasing up your conveyancer/solicitor, your bank/mortgage broker and the vendor’s solicitor or real estate agent between seven and 10 days before the appointed settlement date.
“Call, don’t email, the key players, and ask the following questions,” says Kelly.
- Is everything on track for settlement on [this date]?
- Is there anything that is missing that could stop settlement?
- Is there anything you need me to do/anything I can do to help?
“Follow up your calls with emails confirming the conversations. That way, if there are any problems, you have evidence that you’ve ‘done your part’,” he adds. “This also helps counter any demands for additional funding or payments from your end if things go wrong.”
Kelly adds that you should repeat this process three days out from settlement as a final check. The day before or on settlement day is often too late to resolve any problems and settle on time.
Proactive preparation should mean your settlement goes smoothly, but don’t panic if it still doesn’t go to plan. There’s usually a grace period to resolve any problems, and nine times out of 10 all the parties involved will pull out all the stops to make sure settlement goes ahead within a few days.
To discuss any settlement matters please give Conveyancing HQ a call on 08 9478 6677
06 October 2016
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