FAQs
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[ FAQ | Legal Questions ]
A search of a certificate of Title shows that a caveat. What is it?
Answer: Caveats are notices or warnings that someone has a claim against the property. Claims or interests that are commonly found on a title are leases, options to purchase, and agreements for sale. These represent money or ownership interests in the property that should be dealt with before the property is transferred to a new owner. A lawyer often can arrange to have unacceptable caveats removed from the title before title is transferred.
[ FAQ | Buying or Selling Property ]
Am I better off buying one property for $200,000 or two for $100,000?
Answer: Generally, it is better to buy more property at the cheaper price, but this depends entirely on the area in which you are buying. A $200,000 property in the inner city may be the bottom quarter of the market in that area, whereas a $200,000 property in a provincial town would probably be a mansion. In the former case, a $200,000 property would be OK but not so in the latter for a number of reasons. Firstly, a property in the lower end of the market has a higher rental yield, which results in a better cash flow. Secondly, the lower rent should attract more tenants. Thirdly, if you wish to sell on your retirement, there's more flexibility in selling one small property rather than one large one. And finally, if you're selling, property in the lower quarter of the market should attract other investors as well as first-home buyers, so there should be more potential purchasers.
[ Legal Questions ]
Are there other types of title for lots?
Answer:
Another form of home unit ownership is company title which involves ownership of shares in a company which owns the land and building. Frequently, an owner may need the company's permission to sell his or her shares or lease the unit. Because the owners do not own any of the land and building, but only shares in the company, lending institutions may not look as favourably on company titles as security.
If you intend purchasing shares in such a company, you should discuss the rights and obligations associated with company title with your Solicitor.
Are units better than houses?
Answer: There is not a simple yes or no to this question. There are many financial factors to be considered as well as personal preferences. Houses may, and I say may, experience better capital growth because of the higher land content, but the maintenance could be higher and the yeild (rent/value) could be lower. So in the longer term, the overall returns from units could be the same as for houses. Also, it's a case of horses for courses and the different tenant profile in some locations predetermines the suitability of houses, units or flats. Around the city centre, units or townhouses may suit the young professional couples whereas in the suburbs, young families might be more attached to houses.
[ Writing Articles ]
Can I advertise my business in the article?
Answer: When you registered you will have filled out a signature file at the completion of registraion. Put your URL and a short Bio here. It will be added to the bottom of every article that is published.
[ FAQ | Buying or Selling Property ]
Can I buy a property in partnership with a friend?
Answer:
You can buy a property with a friend if you wish. Tenants in Common ownership (on the Land Title Document) allows two or more individuals to own a fractional interest in a property.
Where two or more unrelated investors wish to buy a property tennants in common allow each investor to hold a separate and distinct share in the property.
Do I have to get deeply involved if I invest in real estate?
Answer: No! Real estate is only the vehicle for building wealth - a means to an end and not the end itself. The great thing about property investment is that you can do as little or as much as you want to. You can do all the maintenance and bookwork yourself, or you can employ someone to do it all for you. The returns from property can be so great that you can afford to pay to have all those things done that you don't like doing or don't have time for - they're tax deductible anyway. A good property manager helps and he can do most things from paying the rates to arragning for the shower to be fixed or making insurance claims if necessary. The degree of involvement is entirely up to you. While doing everything yourself can increase your overall returns, weigh up the real cost in terms of family life and your peace of mind.
[ Writing Articles ]
Do you have a question on any subject relating to Property Investment?
Answer: Your question will be answered by one of our experts on the PIAA panel. Just register and then click on Questions.
[ Writing Articles ]
How do I know when it is published?
Answer: You will be notifed by email when it is published.
[ About the Market ]
How do I pick the best area for capital growth?
Answer:
Although it is human nature to want to find a bargain in an area of great capital growth, I believe it is false economy to spend a huge amount of time searching elsewhere for gems that are probably buried in your own backyard. It is virtually impossible, and really unnecessary, to gauge just where the most valuable suburbs will be in the future.
It is far more important to find an area that you know well rather than try to guess the area that has maximum capital growth potential. History has shown that reasonably well-located property should follow the pattern of around 10 to 11% capital growth over the long-term.
If your property achieves better than this, it's more likely good luck than good selection. Rather than spending weekend after weekend driving from one side of the city to the other, you can maximise your returns and better manage your investment by organising your finances in the best possible way and ensuring that you pay only fair market value in an area around your home with which you are familiar. Of course, this may not always be achievable, particularly if you live in an expensive suburb and you find that you have to go further afield to find suitable rental property.
[ Writing Articles ]
How do I submit and Article to be published?
Answer: Click on the Submit Article button under Contributors menu item! Your article will be reviewed by our editors and published within approximately 48 hours. An editor will determine from the content of your article in what category it will be published.
[ Legal Questions ]
I am purchasing a property but there is a 'writ' on it, what do I have to do to get it removed?
Answer:
A writ of execution is a court order requiring a person to pay a judgment. If, for example, the seller has been successfully sued for $10,000 and has not paid that money, a writ of execution may be registered against all property he or she owns. The seller needs to pay out these writs before the property is transferred to the new owner.
In order to get the writ removed your solicitor will need to make sure that the vendor pays out the amount owed. Your mortgagor will not sign the mortage until this is done. The amount owed can be paid out of the sale monies at settlement, but it needs to be completed and the paper work signed prior to the title being transferred to the new owner.
[ FAQ | Buying or Selling Property ]
I don't seem to have much spare money as it is now. How am I going to afford to buy an investment property?
Answer: If you have already made the commitment to pay for necessities first and luxuries last, then the only remaining stumbling block is more of a percieved problem than an actual problem. Too often, we think of an investment property in the same light as our first home. This being the case, we tend to see only the interest payment as creating an enormous burden. But your contribution to the interest bill, remember, is after the tenant and taxman have paid their share, and what's left may be as little as $80 in the first year - and it gets less over time as the rents increase. In addition, section 221D of the Taxation Act may help you to improve your initial cash flow though reduced PAYE tax instalments which means you don't have to wait up to two years for your tax refund.
[ Buying or Selling Property ]
I have $300,000 in equity in my own home. How much can I afford to borrow to buy more property?
Answer: It's not just a case of how much property you have to borrow against. It's just as important to consider your ability to service the loan. I have known people who own several million dollars worth of prime rural land, but because their income is limited, they are not capable of borrowing very much at all. No matter what the value of your properties, when it comes to borrowing money, we are generally limited by cash flow.
[ Legal Questions ]
I received a Certificate of Title when I purchased my property. What is contained in a Certificate of Title?
Answer: Information about the property is recorded on the title to the property. It is therefore an essentail part of the conveyancing act that the title be searched when buying or selling real estate.
A search of the title reveals the name of the current owner of the property, the legal description of the property, whether or not the owner has mineral rights, and whether there are certain claims, liabilities, or charges attached to the property. Other charges such as maintenance orders or writs of execution are not necessarily registered on the title, but may nevertheless affect the property. A lawyer can ensure that a buyer is protected from any such claims against the seller.
A clear title is one that has no claims, liabilities, or charges against it. Often things such as mortgages, caveats, liens, writs of execution, and easements will be registered on the title.
[ Buying or Selling Property ]
I've been to several banks and they all say I can't afford an investment property. Where do I go from here?
Answer: It's quite common to find people turned down for a property investment loan, even though they feel sure they can afford it. Don't be disillusioned if your first approach to a bank is unproductive.
It's up to you to prepare a budget and an assets/liabilities statement to not only assure yourself that you can do it, but also to assure the financier. In some cases, the financial institution won't have taken the tax refund into account, and this can make all the difference. Don't stop at the first 'no'. The great American baseballer Babe Ruth failed to get to first base just as many times as he hit a home run. Continue until you find a manager who will listen.
I've spent a long time looking for a good property but I seem to keep misssing out on the real bargains. How long should I look before buying an investment property?
Answer: It's my opinion that the "once in a lifetime" bargain comes along about "once-a-month". However, try to remember the real costs in chasing a bargain. If you are investing longer-term, there's no need to spend six months of your valuable weekends in a real estate agent's car chasing that elusive bargain. Time heals all wounds, and so long as you pay fair market price (a little homework should determine what this value would be), you should still achieve sound capital growth. Don't buy the first property you come across, but on the other hand, don't go out with any preconceived ideas of what makes the perfect investment property because you'll spend a year looking for something that may not exist. Spend at least a month familiarising yourself with values in your area, so that when you do find that "right" property, you'll immediately recognise it.
[ FAQ | About the Market | Buying or Selling Property ]
Is a holiday unit at the coast a good investment?
Answer:
It can be if you are careful to distinguish between an investment and a luxury. If purely for investment, the returns can be as good as permanent lettings if it is let for half the year at twice the normal rental.
This means that you use the unit when it is not let rather than letting it when you are not using it. If however, you want it solely for your own holidays thinking it will serve as an investment as well - think again.
None of the expenses (including interest) is tax deductible so it could be an expensive luxury. By the time you have created your wealth, you should well be able to afford a luxurious holiday unit that you can use at any time you so desire.
[ Buying or Selling Property ]
Is property investment still OK if inflation is low?
Answer:
It's not so much the absolute capital growth rate that is important, but rather the growth relative to inflation. With capital growth historically averaging between 2% and 4% over and above inflation, even if inflation were to fall, I would still expect property to perform at this level above inflation. In America, where annual inflation has been slightly lower at around 6%, property growth has averaged more than 8% per year, which is still that couple of percent above inflation.
Everything need to be put in true perspective and if inflation, and consequently capital growth, is lower relative to everything else, property should still be better than any other form of investment. Furthermore, interest rates would have to fall, reducing the cost of the loan to such an extent that the overall rate of return (above inflation) on the property investment should remain about the same.
[ Buying or Selling Property ]
Most people seem to emphasise position, position, position. Should I buy prime residential property?
Answer:
Property in prime locations does experience strong capital growth, perhaps slightly higher than normal, however the real return cannot be measured by the growth alone.
There is not much point in purchasing a property one street back from the main shops if you have borrowed money using a principal and interest loan over 10 years with an interest rate of 18% and the property is so run down that nobody wants to rent it. I believe that property that is well-located, properly financed and properly managed will outperform property selected on the basis of position alone.
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