Property boom: How to multiply your real estate assets

Property boom: How to multiply your real estate assets

Almost three-quarters of Australia’s 2.2 million residential real estate investors stop at one property, but it’s purchases two, three and four than can really set them up for life.

Multiplying a property portfolio is daunting for many because of its bigger borrowings, fear of the unknown, potential affordability issues and a lack of understanding around using debt to get richer.

While two rental properties double your debt, they can also double your profits and income, and supercharge your equity to build more wealth. One investment property worth $500,000 growing at 10 per cent in a year produces $50,000 of capital growth, while two properties grows by $100,000 – a simple way to earn six figures.

Make a Start

Property Investment Professionals of Australia chairman Peter Koulizos says “the hardest one is the first one” when expanding a property portfolio.

“What many investors don’t understand is once they have their first investment property and own their own home, they can use equity from two properties to buy other investment property,” he says.

“Property prices are rising quite quickly too, so if you have an investment property you probably have equity that you didn’t realise.”

The latest Australian Taxation Office data shows 1.6 million individuals have an interest in one rental property, while 419,000 have two properties. Beyond that, 130,000 have three properties, 47,000 have four and 41,000 have five or more.

Koulizos says the first step when expanding is to “get all your ducks in a row”.

“Have a budget and be clear on how much money you earn, spend and how much is left over,” he says.

Get your home and investment property valued – some lenders don’t charge for this service – and educate yourself about what to buy and where.

Diversify

“It’s worth looking outside your own backyard – there can be other areas in Australia that could do better in generating capital growth,” Koulizos says.

“Just do it. Too many people think about it and don’t do anything about it.”

Shashank Pande and wife Smiti have multiple properties and believe in holding them for long periods – at least 15 years – to build wealth and generate several sources of rental income.

He says property is part of the couple’s retirement planning, which involves eventually selling some properties to become debt free and using rent from the others to fund their lifestyle.

“We have a documented long-term plan to help us achieve this,” Pande says.

He says self-doubt was the couple’s biggest challenge when growing their property holdings but this was overcome by educating themselves through podcasts, books and investment courses.

“We think that 2021 is going to be a challenging year for investors given the current state of the market,” Pande says.

“Constrained supply, low interest rates, favourable bank lending policies and incentives available to first homeowners make it harder for Investors to secure investment-grade properties at reasonable prices.”

No Cash Required

Experienced investors don’t pay cash to grow their portfolio, instead using the equity in their properties to cover deposits and fees.

BMT Tax Depreciation chief executive officer Bradley Beer says many people have an “inherent fear of debt” and a lack of understanding around using debt to leverage into the property market.

“When a property goes up in value you don’t get money – you get an overall wealth increase. And you make money on the overall value, not the cash you put in,” he says.

Multiple properties require a bigger backup plan to cover risks including tenants defaulting and interest rates rising.

And don’t forget depreciation tax deductions that often total more than $10,000 a year.

Beer says 70 to 80 per cent of investors don’t maximise their depreciation benefits, either by skimping on the cost of a report or ignoring depreciation altogether.

“Some think it doesn’t exist anymore,” he says, because 2017 rule changes stopped deductions for fixtures and fittings in second-hand property purchases.

But that rule change does not apply to capital works deductions for a home’s building cost, which represents about 85 per cent of total depreciation deductions, and does not relate to new properties, Beer says.

Expand Your Property Holdings 

  1. Assess your assets, debts and income, and write a plan for growth.
  2. Use equity, rather than cash savings, to buy new properties and avoid lenders mortgage insurance.
  3. Research your target market’s prices and rents. Websites including corelogic.com.au, sqmresearch.com.au and realestate.com.au can help.
  4. Consider buying interstate, which can deliver diversification and reduce your land tax bills.
  5. Have a businesslike approach to investing – don’t be emotional about something you won’t live in.

 

Anthony Keane, Daily Telegraph, 22 March 2021
Australian property market 2021: How to make money from real estate | Daily Telegraph

 

Why Sydney boom is problem for other cities

Why Sydney boom is problem for other cities

Sydneysiders are beginning to make a mark on housing markets in other capitals as runaway growth in Harbour City prices encourages more to seek out properties in other locations.

Property prices in the Greater Sydney area have shot up an incredible 5.7 per cent since October and values last week hit a record high, surpassing the previous market peak in 2017, CoreLogic data showed.

This was despite Sydney prices already being an average of about $180,000 pricier than in Melbourne, $360,000 above Brisbane prices and more than $400,000 higher than in Adelaide and Perth.

The explosion in growth has made it harder for home seekers to get into the market and many are now ditching their plans for a Sydney home and looking for investment properties in other locations.

About 60 per cent of those polled in the 2020 Investor Sentiment survey by the Property Investment Professionals of Australia revealed they would consider “rentvesting”.

This meant living and renting in one area while owning or purchasing investment properties in a different location.

The survey also found more first-time buyers were rentvesting, with 44 per cent of first-time investors adopting the strategy last year – up from 34 per cent the previous year.

BFP Property Buyers principal Ben Plohl said there has been a particularly large spike in renvesters based on the lower north shore, where prices have ballooned.

“There is no question that the Sydney property market is in a rising market phase, but the speed of the uplift is already pricing out some potential buyers,” Mr Plohl said.

“Some would-be buyers are reconsidering their options and are choosing to invest their funds in more affordable locations, such as Brisbane and Adelaide.”

Major regional areas like Bendigo, Orange and Albury were also popular for those who wanted to invest while still renting in their Sydney location of choice, Mr Plohl said.

He added that prices in some exclusive Sydney suburbs such as Cammeray, Mosman and Willoughby were moving so quickly that some potential buyers couldn’t keep up.

“Some people rent in these locations already and have decided that it’s more affordable for them to continue doing so than stretch themselves too far financially to buy at the current time,” he said.

“Wisely, they are also deciding to make their available funds still work for them by buying elsewhere.”

There was a similar trend observed at the tail end of the last housing boom in Sydney in 2017 – the rapid price increases led to a surge in Sydneysiders seeking homes in other locations.

Among them was Hobart, which became the fastest growing housing market in 2018. Southeast Queensland was another popular market for Sydney investors.

A simple comparison of prices showed why other capitals and regional markets were so enticing for buyers based in areas like the north shore, Mr Plohl said.

“For example, $900,000 may not secure you much real estate on the north shore, but it could potentially buy you two houses in a more affordable capital city or major regional location, which are also experiencing strong market conditions,” he said.

 

The World News, 17 March 2021
https://theworldnews.net/au-news/why-sydney-boom-is-problem-for-other-cities

Record sales growth for house-and-land packages at greenfield sites across SA

Record sales growth for house-and-land packages at greenfield sites across SA

Booming demand in South Australia for house-and-land packages has fuelled a “standout” year for greenfield developers, who have experienced record sales growth, a major industry report says.

The Urban Development Institute of Australia’s State of the Land report reveals annual SA land sales increased by 83 per cent, from 2054 in 2019 to a record 3766 last year.

The 2020 result is 48 per cent higher than the previous highest volume set in 2013 and has been attributed to historically low interest rates and government housing stimulus packages including HomeBuilder.

Adelaide’s northern suburbs led the charge recording a 168 per cent surge in sales since “pre-COVID” the report said, followed by the Barossa – up 142 per cent – and Adelaide and the southern suburbs recording 70 per cent in sales respectively.

Developers released on average an extra 50 per cent more blocks between June and December 2020, compared with the previous six months.

UDIA SA chief executive Pat Gerace said the record land sale result was driven by the HomeBuilder grant and people wanting to work from home and have larger abodes.

“While other capitals have been impacted more through the slashing of overseas migration, we don’t believe SA has been as impacted as much,” he said.

“Developers and agents have told us that some of this has been softened by ex-pats returning home or first homebuyers deferring travel plans and buying property instead, mainly in suburban areas with good amenity.

“The very quick upward trend in sales late last year is good for economic activity and jobs, but highlights the critical need to ensure new estates come online to maintain our competitive price point in comparison to other states.”

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The median greenfield land price increased by 2 per cent to $183,000 but remained the cheapest among capital cities.

The UDIA report, compiled with property date company CoreLogic, reveal multi-unit completions fell by 38 per cent from 3501 in 2019 to 2164 last year.

New apartment and townhouse stock remained “subdued” in 2020 with 1840 new sales, a 9 per cent decline on 2019, the report said.

Adelaide had the nation’s highest concentration of units within 10km of the CBD, driven by increased urban regeneration and infill projects such as Bowden and new projects in the CBD.

Fifty-two per cent of the new multi-unit dwelling completions in the greater Adelaide region occurred within 5km of the Adelaide GPO, followed by 40 per cent in the 5km-to-10km band.

The State Government has rezoned many inner-suburban areas to allow higher-density development.

The government said 70 per cent of new housing was happening in established suburbs, compared with 76 per cent in 2015.

CoreLogic head of research Eliza Owen said detached houses were expected to remain in “high demand over units” in 2021 and record higher capital growth.

Housing Industry Association SA executive director Stephen Knight said consumer demand for larger blocks would increase because of the COVID crisis with a “trend towards home offices and more space and a trend away from apartment living”.

“If demand continues for larger blocks then availability of suitable subdividable land will become an issue,” he said.

Adelaide University’s property expert and lecturer Peter Koulizos agreed saying people working from home would drive less demand for small places.

“The trend has already started … developers are telling me that no one is interested in two-bedroom apartments or townhouses, they want three-bedroom houses and more,” the chair of the Property Investment Professionals of Australia said.

“Research has also shown that the less often you have to go to work the more you’re willing to live away from work.”

MAKING MOVE FROM EAST TO WEST

Proximity to the city, parks and choice of housing options is what drew first-home buyer Renee Slunjski to Bowden.

The area has undergone a huge renaissance from industrial estate to hip housing estate with an extra 594 houses, units, townhouses and semi-detached properties built in the past six years according to property data from the Valuer General.

“I didn’t do too much searching because I was really happy with the options in Bowden,” Ms Slunjski, 27, who lives with her partner Nick Purgacz, said.

“The Artisan (apartment block) was rustic and modern and it’s location on the outskirts of Bowden appealed to me as I didn’t feel boxed … the location is fantastic, we love being able to walk to work.”

Ms Slunjski, an optometrist, bought her two-bedroom, two-bathroom apartment off the plan in 2017 and took occupancy in January 2019.

She and Mr Purgac moved from Adelaide’s eastern suburbs and love being part of the Bowden “culture”.

“Nick and I love walking along the Torrens a few times a week, around Adelaide Oval and through North Adelaide – it never gets old, and we’re so grateful to have that as our backyard,” she said.

“Sometimes we think it’d be nice to have a backyard, but with two balconies and the facilities around us we don’t think we miss out, maybe when there’s kids in the picture it would be nice to have more space.

“It’s a massive advantage being able to clean the house together in an hour, so we have time to enjoy our weekends.

“This was a first step into the property market and hopefully we can keep it as an investment when we move to the next step into something bigger.”

 

Renato Castello, Herald Sun, 17 March 2021
https://www.heraldsun.com.au/news/south-australia/record-sales-growth-for-houseandland-packages-at-greenfield-sites-across-sa/news-story/95f724d3ed2860ed13a881d3304a9eb1?btr=78094283c4857585798b72513131cbff

Homebuyers locked out of Sydney market by booming prices seek investment properties elsewhere

Homebuyers locked out of Sydney market by booming prices seek investment properties elsewhere

Sydneysiders are beginning to make a mark on housing markets in other capitals as runaway growth in Harbour City prices encourages more to seek out properties in other locations.

Property prices in the Greater Sydney area have shot up an incredible 5.7 per cent since October and values last week hit a record high, surpassing the previous market peak in 2017, CoreLogic data showed.

This was despite Sydney prices already being an average of about $180,000 pricier than in Melbourne, $360,000 above Brisbane prices and more than $400,000 higher than in Adelaide and Perth.

The explosion in growth has made it harder for home seekers to get into the market and many are now ditching their plans for a Sydney home and looking for investment properties in other locations.

About 60 per cent of those polled in the 2020 Investor Sentiment survey by the Property Investment Professionals of Australia revealed they would consider “rentvesting”.

This meant living and renting in one area while owning or purchasing investment properties in a different location.

The survey also found more first-time buyers were rentvesting, with 44 per cent of first-time investors adopting the strategy last year – up from 34 per cent the previous year.

BFP Property Buyers principal Ben Plohl said there has been a particularly large spike in renvesters based on the lower north shore, where prices have ballooned.

“There is no question that the Sydney property market is in a rising market phase, but the speed of the uplift is already pricing out some potential buyers,” Mr Plohl said.

“Some would-be buyers are reconsidering their options and are choosing to invest their funds in more affordable locations, such as Brisbane and Adelaide.”

Major regional areas like Bendigo, Orange and Albury were also popular for those who wanted to invest while still renting in their Sydney location of choice, Mr Plohl said.

He added that prices in some exclusive Sydney suburbs such as Cammeray, Mosman and Willoughby were moving so quickly that some potential buyers couldn’t keep up.

“Some people rent in these locations already and have decided that it’s more affordable for them to continue doing so than stretch themselves too far financially to buy at the current time,” he said.

“Wisely, they are also deciding to make their available funds still work for them by buying elsewhere.”

There was a similar trend observed at the tail end of the last housing boom in Sydney in 2017 – the rapid price increases led to a surge in Sydneysiders seeking homes in other locations.

Among them was Hobart, which became the fastest growing housing market in 2018. Southeast Queensland was another popular market for Sydney investors.

A simple comparison of prices showed why other capitals and regional markets were so enticing for buyers based in areas like the north shore, Mr Plohl said.

“For example, $900,000 may not secure you much real estate on the north shore, but it could potentially buy you two houses in a more affordable capital city or major regional location, which are also experiencing strong market conditions,” he said.

 

Aidan Devine, realestate.com.au, 17 March 2021
https://www.realestate.com.au/news/homebuyers-locked-out-sydney-market-by-booming-prices-seek-investment-properties-elsewhere/

 

Investors drive regional and coastal surge

Investors drive regional and coastal surge

Two-thirds of investors were confident that property market conditions would strengthen nearly six months ago, proving that the present price growth should not be a surprise, according to the Property Investment Professionals of Australia (PIPA).

The 2020 PIPA Annual Investor Sentiment Survey found that 67 per cent of investors thought it was a good time to invest in residential property, with nearly 50 per cent intending to buy a property during the next year.

Notably, survey respondents also showed a sharp uptick in interest in regional areas as well as coastal locations.

Indeed, the proportion of investors that said regional markets were the most appealing increased to 22 per cent in 2020 from 15 per cent in 2019, with coastal locations also on the rise – up to nearly 12 per cent from eight per cent the year before.

PIPA chair Peter Koulizos said investment activity had been growing over recent months, which is a situation set to ramp up this year.

“The low point for investment activity was May last year, however, new loan commitments have grown since that time to be about 10 per cent higher in December than the same period the year before.

“In fact, the latest official data shows that more than $6 billion worth of new investor loans were recorded in December – the highest level since July 2018.”

With strong activity from owner-occupiers and first home buyers already under way, the increasing numbers of investors in the market would add to property price pressure in many locations around the nation, Mr Koulizos said.

“Part of the reason for dwelling price rises is the low supply of properties that are hitting the market, which was also foreshadowed in last year’s survey when 71 per cent of investors indicated that the pandemic had made them less likely to sell a property over the short-term,” he said.

The survey also foretold the current robust market conditions in smaller capital cities, as well as major regional areas, with investors indicating they were most bullish about Brisbane rather than Melbourne or Sydney.

Mr Koulizos said with owner-occupiers, investors, and first home buyers out in force at the same time, there is only one way for property prices to go – up.

“If you add low supply levels as well as once in a generation interest rates into the mix, then property markets are set for strong conditions for the foreseeable future, in my opinion,” he said.

 

Dean Webster, Surf Coast Times, 11 March 2021
https://timesnewsgroup.com.au/surfcoasttimes/real-estate/investors-regional-coastal-surge/