MarathonMortgages.com

Education Newsletter October 2010

Understanding property data

An important part of researching a potential property investment is accessing and interpreting good data.

But where can you get that data and what does it actually mean?

Property data is available from a number of sources ranging from paid subscriptions, magazines and newspapers. With the increased use of smart phones some of the major lenders have even created iPhone applications specifically for property data.

Interpreting property data

Interpreting data from a variety of sources can be like comparing apples and oranges; so try to compare apples with apples.

Raw data comes from many places and sources, and the same data can be used in a number of different ways to come up with completely different results. Here are a few things to keep in mind when looking at property data:

• Is the data on the same type of dwelling (e.g. four bedroom house or two bedroom unit)?

• Is it only based on sales in the area (which can incorporate different sized dwellings, e.g. units and houses)?

• Is the data based on the median sale price or the median value?

• Is the data pulled monthly or quarterly?

• Is the data pulled from capital cities only or does it also include regional areas?

• Is the data correct and not inflated or old (due to the nature of purchasing a property and the time it takes to process sales, some data can be over a year old)?

Keep in mind that 68% of the population live in major cities, so the remaining 32% are in regional and remote areas and property sales happen there as well. Cities and regions are completely different and when looking at the figures you need to take this into account.

Median sale price or median value?

Some analysts use the median sale price to reach conclusions, and others use the median value. So what is the difference between the two?

• Median sale price: the middle figure of all sales that have taken place in a suburb

• Median value: the middle figure of the value of all properties in a suburb.

One of the property data providers, Residex, uses median values for their data. This is because they believe that the median sale price only shows changes in buying patterns, not actual changes in the value of properties. If the median sale price is used you don’t necessarily see the changes in the growth of each property, only the changes occurring in the location.

Find out more about Residex by visiting http://www.residex.com.au/

Another property data provider, APM, takes a quarterly view of property price movements rather than publishing prices monthly when sales data is continuing to filter in.

According to APM, this gives them a broader, more comprehensive set of property data to analyse and therefore provides an accurate representation of property price movements as well as consistency over time.

It is worth noting that APM’s House Price series (published quarterly) is used by the Reserve Bank of Australia as well as Australia’s major banks, Government agencies and real estate professionals.

Find out more about APM by visiting http://www.apm.com.au/

Stay objective

There’s plenty of information out there so make sure you’re comparing apples with apples, but don’t get too caught up analysing the data. Stay objective and use the data as an extra resource only, not as a definitive answer.

Keep an eye on all the numbers that are published and maintain a balanced and objective view.

Six tips to get ahead on your home loan

A home loan is the biggest debt that most of us will have in our lifetime.

Here we give you some sound advice on how to take some simple steps to reduce the length and total cost of this debt.

Whilst we may love our homes, the relationship with our home loan is another matter entirely. Here are six tips to help you reduce the term and cost of your home loan.

1. Plan to pay it off sooner

Loans are typically taken over 25 or 30 years. The longer you take paying off the principal the more interest you pay along the way and the higher the overall cost of the loan.

Use a repayments calculator to develop a plan to pay it off in less time, and increase your repayments accordingly. Once you've made the commitment simply adjust your budget, and in no time you'll be used to the new arrangement.

2. How often do you pay?

Make more frequent payments. As interest is normally calculated daily, any repayment has an effect from the day it is paid. Therefore if you’re paid weekly or fortnightly, make a payment at the same time. Paying just a week or two in advance for part of the due amount will have a noticeable effect on the interest you pay and the overall term of your loan.

This can also be a simple way to increase your repayments. For example, if you’re paid fortnightly then simple divide the monthly repayment by two and pay that. This will mean that you are actually paying 26 fortnights in 12 months which means that you’ve effectively made 13 monthly payments in the year.

3. Deposit any spare cash into the loan as soon as you can

Making extra repayments at any time is a good strategy. But remember the earlier the better, thanks to the power of compounding interest over time.

Make sure your home loan has an easy, “no charge” redraw facility in case you want to use the money later.

4. Have your income paid into your home loan

Provided you are careful to keep track of your expenses, this may be one of the best ways to use your existing financial resources to reduce the cost of your loan.

Have your income paid directly into your home loan and manage your day-to-day expenses on a credit card with an interest-free period. This way you keep the home loan balance as low as possible for as long as possible, so reducing the interest which is calculated daily on the outstanding balance.

5. Don’t reduce your repayments

If your minimum home loan repayment drops because interest rates fall, don’t lower your repayment.

By maintaining your repayment at the original level you won’t even notice that you’re paying extra, but you’ll be reducing your home loan faster.

This also means that when interest rates rise again that you won’t have to pay extra – unless you can afford to.

6. Get the right home loan

It’s important to have the right home loan to take advantage of these tips and to save money.

If you'd like to confirm that your loan is the best one for your needs, please get in touch for a free "home loan health check".

Education Newsletter September 2010

Hello, Welcome to this month's email newsletter. If you have any loan queries please give me a call. Cheers, Terry Choosing a real estate agent You take your time to find and keep the services of a good plumber, a lawyer or an accountant. As your home is probably your biggest asset, selecting the right real estate agent should be even more important. Believe it or not, the biggest billboards or the loudest print ads may not equate to the best agent – certainly for your requirements, anyway. Interview the agent When you select a real estate agent, the situation should be viewed as though you’re performing a rigorous job interview. After all, you’re selecting someone to perform a job – for you! When it comes to selling what for most people is their biggest asset, your expectations should be demanding. Perhaps surprisingly, most of us do not select real estate agents on the basis of recommendations from friends or colleagues. It is the advertising ability of an agent or agency that usually draws us in. You might have experienced a good agent at an open home you’ve attended, or you might be pulled in by those advertisements; these days, the internet is a major search tool when it comes to locating agents. At the very least, agents should portray a high degree of professionalism and dedication for their work. Does the agent you’re investigating appear interested in your property – or is it just another one in a line of many they’re hoping to nab as ‘a listing’? Desirable qualities So what attributes should you be looking for in an agent? Some of the qualities should include: Recognising what your actual requirements are. We live in a marketing directed world where serving the customer, not oneself, is the directing force. Professional designation and membership of the Real Estate Institute in your State. Always remember, the agent selling your property works for you, not prospective purchasers. References from previous clients. Knowledge of the area in which you’re selling your property. A realistic familiarity of the price range in which you want your property to sell. Ask good questions When selecting an agent, formulate a list of the questions you will need to ask your shortlist of prospective interviewees. What is your experience as a real estate agent? Are you employed full time or part time as an agent? How long have you worked this particular location? How many property sales were you involved with last year? Do you normally represent buyers or sellers? How many properties do you currently have listed? How many prospective buyers approach you? What do you perceive your personal strengths are as a real estate agent? What do you think our property is worth in the current market and how did you arrive at that figure? Which marketing strategy do you suggest is the best one to pursue for our property? Things to remember Remember, your chosen agent should provide you with: Access to recent market sales data in your area. Contact with a large number of buyers. Advice on how best to market and present your home. The ability to negotiate the best price to you with buyers. This article was reproduced from http://www.realestate.com.au/ Ease the Pain Each year the cost of private health insurance goes up, often by considerably more than the general rate of inflation. Here's a few tips designed to help you reduce your costs and ease the pain. April is not a great month for private health insurance customers. It’s when insurance premiums are hiked and this year was no exception. The federal government approved an average 5.8% rise in private health insurance premiums from April 1 - significantly higher than the rate of inflation. The government justified the hike saying it was lower than last year’s increase (6%) and lower than industry expectations. But this means nothing to families who have to find the extra money, estimated as an extra $200 a year. Premiums have risen by 73% since 2002 according to http://www.iselect.com.au/, which compares health insurance premiums. There might not be anything you can do to stop ever-increasing premiums. But you can look for ways to cut the cost of your insurance rather than just accepting it or opting out of private health insurance altogether. Pay only for what you need It makes no sense to pay for obstetrics and IVF if you are in the mature stage of your life, according to Canstar Cannex. The same applies to a young person paying for hip replacement cover. So start by looking at your existing policy and whether it can be restructured to result in lower premiums. Ask your insurer to help you work out what cover you can remove to help reduce premiums. Your needs change as your life progresses so it’s worth reviewing this regularly. Choose a higher excess Most policies will charge you either an excess or co-payment when a service is provided. The higher the excess or co-payment you choose, the lower the premium is likely to be. You’ll generally have to pay the co-payment every time a service is provided, but an excess may be charged each time you go to hospital in a year or only once. Make sure you find out which one applies to you. This strategy may well suit a young, healthy person who does not envisage regular trips to hospital, whereas an older person may not want to take that risk. It’s important to choose an excess that you will be able to afford - otherwise it’s a false economy. It is also worth noting is that to avoid the Medicare Levy Surcharge, you must not choose an excess greater than $500 for individuals and $1000 for couples/families. Shop around You might be surprised when you compare policies and insurers. You may get the same cover for less or more cover for the price you currently pay. If you decide to switch, double check what waiting periods may now apply with your new insurer. Pay in advance There’s no escape from health fund fees going up every year, but if you pay early you may be able to dodge this. Most health funds will allow you to pay a year’s health insurance premiums in advance to lock in the previous year’s rate for the next 12 months. In most cases, to lock in the cheap health insurance premium you will need to pay early in the year, around January or February. Start young Starting young can save a lot of money on premiums. If you’re privately insured before June 30 of the year you turn 31 you will be on the lowest premium rate for life. From age 30 you will have to pay an extra 2% for every year you remain uninsured. So, for example, if you wait until you’re 40 to take out private health insurance you’ll pay an extra 20% - and if you wait until you’re 45 you’ll pay an extra 30%.

Education Newsletter August 2010

Get the best return from your investment

Deciding to invest in a property is a major decision. Having made that decision, it is vital to maximise that investment.

Here are some great tips that will help you to do just that.

Here are nine of the best tips to help you boost your investment, courtesy of Your Investment Property magazine.

1. Good presentation

Good presentation is the key to maximising return on a property investment. A well presented property attracts interest and creates increased competition among prospective tenants, enhancing the prospects of a higher rental return.

2. First impressions

First impressions are critical. A fresh, clean and cheery property arouses interest and creates the conditions for the best rent.

3. Tidy up between tenants

When a rental property becomes vacant it pays dividends to look at it through the eyes of a tenant and note anything that requires attention. Nothing turns prospective tenants off a property more quickly than scuffed or dirty paintwork, stained carpets or a door hanging by one hinge.

4. Good services

It is important to make sure appliances, electrical fittings and hot water services are safe and functioning efficiently. Dripping taps, broken doors, loose window locks and cracked glass must be repaired.

The outside shouldn’t be overlooked either, since that’s what the prospective tenant sees first.

5. Use neutral colours

If improvements such as new carpets or painting are considered necessary, it’s preferable to use neutral colours that will fit with most people’s taste rather than bold fashion statements that may be off-putting to some would-be tenants.

6. Consider an internal laundry

It isn’t necessary to spend thousands of dollars to make a rental property attractive. An internal laundry is a relatively simple and inexpensive improvement for landlords to make, and it can pay significant dividends in terms of higher rental revenue as it will make the property more appealing to prospective tenants.

7. Renovate selectively

Before spending a substantial amount of money on renovations, it is advisable to seek professional advice about the likely benefit, both in terms of increased rental and the property’s potential to provide greater capital growth in the future.

8. Regular maintenance

It also makes good sense to maintain properties in tip-top condition throughout a tenancy in order to retain good tenants. This will optimise the likelihood of success with rent reviews and lessen the chances of having to outlay large sums of money to bring the premises up to scratch when it is vacated.

9. Be realistic

Above all, investors need to be realistic about rents and understand exactly where their property fits into the marketplace. Just as vendors often have an inflated idea of the worth of their home; landlords can have unrealistic expectations that can sour the property investment experience for them.

Renovation activity likely to increase

Property value growth over the second half of 2010 is expected to be fairly modest, according to RP Data Research.

This means that many home owners will look to add value through renovation.

With the rate of property value growth slowing, sales volumes falling and construction of new housing continuing to soften, RP Data Research are forecasting an increase in the number of homes undergoing renovation over the coming months as owner occupiers and investors seek to increase the value of their existing properties.

Over the June quarter of 2010 property value growth has slowed and sales activity has begun to fall. These conditions suggest that many home owners may be more likely to remain in their current residence rather than sell and move.

Building approvals down

Although building commencements data was still reasonably positive up to the March quarter of this year, building approvals have been trending lower since March and are now down -19.5% over the three to June.

Owner occupier housing finance commitments for the construction of new dwellings and for the purchase of new dwellings is down -23.6% and -13.7% respectively over the year indicating that there are far fewer opportunities for those looking to buy a brand new home. A brand new home will essentially have everything the purchaser needs and not require any improvement (at least in the short term).

Renovating activity up

When comparing the Australian Bureau of Statistics (ABS) data for June 2009 to June 2010, the total value of building approvals for alterations and additions (including refurbishment and conversion) has increased by 13.8% to more than $520 million during the month.

Renovation activity comes in many shapes and sizes and includes:

• major renovations where owners add additional rooms to a house,
• moderate renovations such as a new kitchen or bathroom, or
• minor renovations such as re-painting or re-tiling rooms.

Equity available

For anyone that has owned since the beginning of the price surge at the beginning of 2009, they are likely to have more than enough equity to undertake some property improvements to their current home.

If you would to explore how you could access the equity in your home to undertake some renovations, please get in touch.

Is it a Good Time to Fix your Interest Rate?

In recent monthe we have seen the major lenders increase their fixed interest rates. Does this mean that we have reached the bottom of the interest rate cycle?. It is difficult to predict in the short term, whether interest rates will increase and how dramatic that increase will be.

Fixed rate loans can provide "peace of mind' as you will know exactly what your repayments will be for the fixed period. However,if your circumstances change and you wish to exit your loan before the end of the fixed term you may be up for substantial "break costs". These costs could run into the tens of thousands of dollars.

Some people have  taken an "each way" bet and have split their loan into a fixed component and a variable component.

Who do you know who could use some advice regarding their loan structure. Please dont keep me a secret.

My Ongoing Professional Training

I have just finished a 2 day intensive professional training program as part of my ongoing professional development. This is the second time that I have gone through this training and it is amazing what you pick up the second time around.

The training was aimed at the importance of providing exceptional service and the opportunities for extra business that result because I go "the extra mile" for my clients.

My business is based on referrals and I know the importance of providing a "first class" service. I must be ahead of the pack if you are to refer me to your friends, family and work colleagues.

On the evening that the seminar ended I had an appointment with a new client. Even though it was Friday evening and my head was spinning from the the intense 2 days I was determined to show how I could help him get into his first home.

We had a successful consultation and as a result he referred me to his sister who is looking to purchase a property.

Who do you know who may be looking to purchase property in the near future?

Don't keep me a secret.

Terry Prendergast