Tools, tips, industry knowledge & market trends.

Extracting the best offering in the market.

Finding value in a real estate market that has been rising for two years seems optimistic. Value can be extracted in many more ways than just buying at a low price. Indeed, there are not too many (if any) sales happening at a low price.

Even though the market is fully priced, there are still opportunities galore in this low interest rate environment.

First Home Buyers

Buyers are paying higher prices AND higher stamp duty.

The only thing worse than knowing that you have a big bill to pay, is not knowing you have a big bill to pay. This would sum up how the stamp bill applies to many home buyers. They know that stamp duty exists, they know it's going to be large, yet still get bill shock when the time to pay it arrives.

One of the main reasons that the stamp duty bill gives so many buyers bill shock, is because the amount payable accelerates as prices rise.

At $400,000, the stamp duty payable by a home buyer is $13,490 or 3.37%.

As Sydney's traffic continues to clog the roads, young families are opting to stay closer to the CBD in exchange for less space. Properties such as apartments and townhouses that were once considered largely unsuitable by families are now in demand. Aside from being well located, Inner City strata title properties tend to be similar in price (if not cheaper) to larger houses in the suburbs. 

Coming into 2014, there were some misgivings as to whether the property market could continue to rise. 2013 had experienced strong gains of 10-15%, but the rally had noticeably begun to taper by the last quarter. Given Sydney has experienced several short bursts of price growth in the past decade, there was a sense that this was just another short rally.

When you first list your property on the market, your greatest desire is also your greatest fear. It's the early offer. Waiting for the agent to provide feedback after the first inspection is a nerve wracking time. Is the home presented correctly? Is the pricing strategy in line with the market? Will people like it?

If the response to those questions is favourable and a buyer makes an early offer, suddenly the nervous energy shifts. Is it too quick? How long should it stay on the market? It's only early, we are in no rush.

The internet has just about killed off newspapers world wide. With it has gone the rivers of gold - the classifieds. Classified advertising for cars, real estate and jobs all underpinned newspaper's profits.

The rivers of gold for newspapers also created rivers of gold for estate agents. Agents packaged up expensive and largely needless print campaigns that home sellers were convinced to pay for upfront.

What is the net yield?

Frighteningly, many residential investors don't know how to calculate net yield on their investment. They see that the property leases for $1,000 per week and do modeling around $52,000 a year income. The only figure that counts for investors is the amount left over after all costs have been covered. Strata rates, council rates, water rates, land tax, vacancy, agents fees and maintenance are all costs that can take 20-30% off the gross yield. The $52,000 you thought you were getting just turned into $36,400.

1. Under-renting the property and failing to keep pace with the increasing market.

When interest rates, strata levies and land tax rise, the landlord is left to carry the extra burden. It is only fair and sensible to ensure that the income the property generates is at the market rate and not significantly below.

2. Failing to spend money on minor maintenance.

When it comes to repairs, a little expenditure today can save a lot tomorrow. Good quality properties attract good quality tenants.

If 2014 was the year of the foreign investor, expect 2015 to be the year of the expat returning to the property market. Having given up on Aussie housing in 2014, somewhat due to inflated property prices, but mainly because of the high Australian Dollar (AUD) throughout the year, expats are now set to re-enter the Australian property market as the Aussie dollar sinks to new lows. 

A lot of attention has been dedicated recently to aggrieved buyers who have been bait priced and hooked into bidding on properties they could never afford to buy. The respective buyer's anger at this sales tactic is completely understandable. There is no need to deliberately under quote the value of a property in order to attract bidders to an auction. In boom times in particular, there are already an excess number of buyers around without having to under quote to attract more financially incapable buyers.

More than half of all property investors budget (or hope) for income 52 weeks of the year. The reality is that less than half of all investment properties generate 52 weeks income in any given year. Vacancy is an unwelcome reality of being a property investor. Along with maintenance neglect, vacancy can be cruel to the investors income return.

Lost income is like lost sleep - you can never make it up. It's gone. Whilst it's impossible to avoid vacancy, there are several crucial decisions you can make to ensure increased occupancy. 

It's the phenomenon that makes no sense at all when you think about it. Real estate advertising revenues increase when the market is strong and decrease when the market is weak. If advertising really was the true motivator behind buyers purchasing real estate, wouldn't it be smarter to spend more on advertising when conditions are weak and less in a boom when conditions are strong?