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1. Real Estate Investment Options The three primary areas of financial growth through Real Estate Investment are:
PRE-OWNED INVESTMENT Already built, and ranging in age, these properties can offer an established infrastructure and community facilities. This assists to lift both desirability for tenants and capital gain. The trade off is a reduction in tax beneficial depreciation and higher maintenance costs. OFF THE PLAN INVESTMENT You get in on the ground floor of a development before construction is completed. By securing a property before completion, you stand the best chance of capital gain because you buy before or during construction. Because construction can take some time you can benefit from the growth in value while your investment is being built. Also, because the property is new you can maximise rental returns and depreciation. BECOME A VIRTUAL DEVELOPER - NEW Through our association with a number of land developers and builders, we offer a package of a block of land with a house yet to be constructed. This assists you to be the developer yet there is very little for you to do other than choose the project. Because the land and house are 'at cost', there is a high likelihood of immediate capital gain. You can either sell for profit, refinance to access profit or rent the property to gain a better return and maximum depreciation. BECOME A VIRTUAL DEVELOPER - RENOVATION Working with a number of specialist renovation companies, we source a block of units that need renovation to potentialise their value. We offer these units separately to investors who agree to purchase a unit together with an external renovation package and an optional internal renovation Package. The benefits are huge. Purchasers typically enjoy stamp duty only on the sale contract, there is often capital gain on completion of the renovation, certainly you can maximise depreciation and of course you can maximise rentals. Usually you also get an older property with style located in a well established area with established community infrastructure that will continue to serve as a great investment. Properties available... |
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2. Australian Investors Investing in Real Estate is a very good idea. It is a comparatively low risk way to leverage your savings and income (or equity in property) to improve your overall financial position to achieve capital growth. Capital growth is almost always assured, returns while often secondary, improve with time and the ability to use the costs of owning an income producing property to reduce your taxable position can be massive. In short, owning a well structured Real Estate Investment property can be very rewarding. The best structure for investing in Real Estate depends on your own financial position. There are three main options to benefit you:
Deposit - There are two types of deposit. The first is an often refundable 'holding deposit' that shows you are interested in a property and in most cases takes the property off the market until you can exchange contracts for sale and purchase. In most cases, if you do not proceed, your 'holding deposit' is refunded to you. The second is the equity or stake you are putting into the property. Equity has two forms - you can either save and put your cash savings into the property or you can use equity from an existing property. After Exchange, the Deposit on Exchange is not usually refundable. The balance to full purchase price is usually raised through a loan. Mortgage Application Fees - When making an application to borrow on a Mortgage, a fee for the Application, for Valuations and for processing the loan may be charged. This is different for all lenders, some only charge a nominal fee. Stamp Duty - When considering a property purchase, be sure to budget for additional costs. The most significant of these is State Government Stamp Duty. Stamp Duty is different in each state and territory of Australia, so check for the costs for the property you are considering. Strata Fees - This does not concern house owners. Owners of apartments however are liable to pay 'strata fees' or levies. These are grouped maintenance fees and costs for the building and are collected by the building's Owners' Corporation or manager who is appointed by the owners. Strata fee costs are available before purchase and are generally payable quarterly. They are different for every building depending on the maintainence required and the facilities. Local Council Rates - Owners of all properties are liable to pay 'council rates' or levies. These are costs for providing the community infrastructure and are collected by the local council. Council rates figures are available before purchase and are generally payable quarterly. They are different for every area. Water Rates - Owners of all properties are liable to pay 'water rates' or levies, these are costs for providing water to the property and are collected by the local water company. In many cases these are paid by the tennant under the terms of the lease. Water rates figures are available before purchase and are generally payable quarterly. They are different for every area. Rental Management costs - The rental manager will charge 1 week's rent as the initial letting fee, plus 4 to 10% of the rental collected as the monthly management fee, plus a percentage of any costs they pay for you. Rental Management. Rental Manager - If you're buying a property as an investment, you will probably need a property manager, unless you prefer to manage your own property. A property manager locates and manages the tennants in your property for you. Usually it is better to choose a rental manager located close to your property, they must be either a licenced real estate agent or licenced rental manager. Rental Agreements - In most areas, rental properties are unfurnished and leased for 6 or 12 months. Although casual or holiday rentals appear attractive, often the actual return is difficult to accurately predict and vacancy can frequently occur. A good long term tennant is the preferred option. In most cases, the tennant may not sell or transfer the lease without the owners approval, and essentially the lease has no saleable value to the tennant. It does provide 'security of tennure', which means if the tennant keeps to the terms and conditions of the rental agreement, they can stay without fear of eviction during the term of the lease. Although tennancy agreements vary, there is usually the option for the owner to review the rent paid by the tennant every 12 months by up to a 10% increase. If the property is vacant, the owner can 'go to market' and get as much rent as the market will pay. Rental Guarantees - Some property developers will offer investors a 'rental guarantee'. This is a company guarantee that a minimum rent will be received by the investor no matter what a tennant pays, or if there is a tennant at all. This is very attractive for investors and can give added security. Remember that rental guarantees are usually funded by slightly higher purchase prices. This must be evaluated on a case by case basis, as sometimes the investor is the big winner. Tax deductions. The costs of owning an investment property, together with the interest on borrowings, will be greater than the annual rental income from the property. These losses, together with depreciation, are offset against your 'taxable income'. This is commonly referred to as 'negative gearing'. These losses are used each year to reduce your taxable salary, investment income or retirement income. This provides you with significant assistance to own investment property for many years. Depreciation - Depreciation is the value of buildings, fixtures, fittings being available as a deductable cost of owning an investment property. This is a significant tax benefit afforded to new and near new property through the depreciation of fittings and a special allowance to deduct construction costs. It is important to structure your purchase to maximise tax deductions and costs. To do this, you should borrow at reasonably high levels (ie 80% of the property purchase value). You should buy property with maximum depreciations available (ie new). You should buy property with reasonable returns (in demand rental areas), and you should buy property that will grow in value while you are away and beyond. Most importantly, you should buy property that with all these factors considered is affordable for you. Properties available... |
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3. Overseas Investors When acquiring and investing in Australian Real Estate, there are a number of factors to consider. Although it may appear complex, the Australian property industry is well regulated and structured to ensure fairness and protect the rights of the investor. Further, your rights as an owner and landlord are also protected. About buying property in Australia Foreign nationals are subject to the requirements of the Foreign Investment Review Board (FIRB). The rules specify that anyone who is not an Australian citizen or does not have a visa for permanent residency may buy only newly constructed property. This generally means either apartment developments in the main cities or holiday developments, or house and land packages close to main cities. Most developers will get FIRB pre-approval. This means they can sell up to 50% of their apartments to foreign investors. When FIRB approval has been granted to a development, the overseas buyer does not need to personally apply for FIRB approval of their purchase. Buying Real Estate in Australia involves an 'exchange' of contracts, which is the point at which a purchaser legally commits to the purchase. A deposit, which is a point of negotiation (but usually 5-10% of the purchase price), is required at this point. However, you do not have ownership of the property until 'settlement' occurs, which is the point at which you pay the full balance of the purchase price (by cash or with Mortgage borrowings) as well as government duties and taxes, and any other costs of purchase. With all ready built properties, 'settlement' is usually six weeks after 'Exchange'. If you are buying 'off-the-plan', there can be up to two years between exchange and settlement. It is important to have legal advice on the Contract for Sale and Purchase of Property. This must be from an independent solicitor or conveyancer and must be gained before signing the contract. Your solicitor or conveyancer will act on your behalf and review the terms of the contract to ensure that all legal and building regulation requirements have been met by the vendor. Purchase costs Stamp Duty - When considering a property purchase in Australia, be sure to budget for additional costs. The most significant of these is State Government Stamp Duty. Stamp Duty is different in each state and territory of Australia, so check for the costs for the property you are considering. Strata Fees - This does not concern house owners. Owners of apartments however are liable to pay 'strata fees' or levies. These are grouped maintenance fees and costs for the building and are collected by the building's Owners' Corporation or manager who is appointed by the owners. Strata fee costs are available before purchase and are generally payable quarterly. They are different for every building depending on the maintainence required and the facilities. Local Council Rates - Owners of all properties are liable to pay 'council rates' or levies. These are costs for providing the community infrastructure and are collected by the local council. Council rates figures are available before purchase and are generally payable quarterly. They are different for every area. Water Rates - Owners of all properties are liable to pay 'water rates' or levies. These are costs for providing water to the property and are collected by the local water company. In many cases, these are paid by the tennant under the terms of the lease. Water rates figures are available before purchase and are generally payable quarterly. They are different for every area. Rental Management costs - The rental manager will charge 1 week's rent as the initial letting fee, plus 4 to 10% of the rental collected as the monthly management fee, plus a percentage of any costs they pay for you. Rental Management Rental Manager - If you're buying a property as an investment, you will probably need a property manager, unless you prefer to manage your own property. A property manager locates and manages the tennants in your property for you. Usually it is better to choose a rental manager located close to your property. They must be either a licenced real estate agent or licenced rental manager. Rental Agreements - In most areas, rental properties are unfurnished and leased for 6 or 12 months. Although casual or holiday rentals appear attractive, often the actual return is difficult to accurately predict and vacancy can frequently occur. A good long term tennant is the preferred option. In most cases, the tennant may not sell or transfer the lease without the owners approval, and essentially the lease has no saleable value to the tennant. It does provide 'security of tennure', which means if the tennant keeps to the terms and conditions of the rental agreement, they can stay without fear of eviction during the term of the lease. Although tennancy agreements vary, there is usually the option for the owner to review the rent paid by the tennant every 12 months by up to a 10% increase. If the property is vacant, the owner can 'go to market' and get as much rent as the market will pay. Rental Guarantees - Some property developers will offer investors a 'rental guarantee'. This is a company guarantee that a minimum rent will be received by the investor no matter what a tennant pays, or if there is a tennant at all. This is very attractive for investors who are overseas or have restricted income levels. Remember that rental guarantees are usually funded by slightly higher purchase prices. This must be evaluated on a case by case basis, as sometimes the investor is the big winner. What you also need to know. Taxation - The Australian taxation regime is different from most countries in the Asian Region. It is based on a federal system and is applied uniformly throughout all of Australia. There are three main levels of Australian Taxation Law that affect all persons investing in Australian property. They are Income Tax, Capital Gains Tax (CGT) and Goods and Services Tax (GST). People intending to migrate to Australia should pay particular attention to some key tax planning issues and entry requirments before they choose Australia as a destination for migration. Finance, loans and mortgages - Unless you have a deliberate and strategic reason for investing with cash, borrowing to fund an investment property has real advantages:
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4. Ex-pat Investing Expatriate Tax Planning For Aussies working and living overseas, there are many opportunities available and a little planning is essential. Expatriates usually earn more money overseas than when they work and live back home. The change in their taxation status can be used to maximise disposable income. The accumulated tax benefits can make investing more rewarding, especially on return to Australia even if that is many years away. It is essential that you consult a professional advisor in the area of Ex-patriate taxation. There are many companies specialising in this area. Your Australian accountant may be of assistance, and the ATO will provide 'guidence' to give you an idea of the areas to be considered. Here is a general guide: Going overseas When you decide to take a longer term overseas posting, the first question you must answer is whether you will remain a resident for tax purposes or become a non-resident for tax purposes. You may not have a choice as to which tax status you will have. Residency is a matter of both fact and law. Although the Australian Tax Office (ATO) has well publicised rulings on possible tax status, you are well advised to talk to your accountant, a specialist consultant or the ATO well before you leave. Your tax status and the circumstances of your overseas employment will probably be relevant to many of the issues you will need to address. Certainly if you are not sure, seek advice. It is safe to say however, that someone who is taking up a long term position overseas, for more than say twelve months, is essentially moving their family and 'life' to another country. They could be deemed a 'non-resident for tax purposes'. If this is the case, there are some important issues to plan when becomming an expatriate: Before leaving:
Ex-pat Investment Property Australian investment property as a very popular investment choice for Ex-pats as it can be one of the best tax planning and wealth creation tools while overseas. If you are basing the investment property on your own home or an already owned property, you already have set up the structure you will use to maximise your position. Essentially, it is better to purchase a property fresh and deliberately establish the best possible structure to maximise your Ex-pat position. It is important to structure your purchase to maximise tax deductions and costs. To do this, you should borrow at reasonably high levels (ie 80% of the property purchase value). You should buy property with maximum depreciations available (ie new). You should buy property with reasonable returns (in demand rental areas), and you should buy property that will grow in value while you are away and beyond. Most importantly, you should buy property that with all these factors considered is affordable for you. Tax deductions Usually the costs of owning together with the interest on borrowings will be greater than the annual rental income from the property. This loss is commonly referred to as 'negative gearing'. While you are overseas, these losses have no 'taxable income' to offset against, except if you have other rental income or property capital gains. These losses therefore accrue each year and eventually when you return to Australia, these built up losses can be used to offset your salary, investment income or retirement income. This provides you with a significant buffer against taxation for many years. The long term taxation benefits associated with Australian investment property should not be underestimated and should be integral in every Ex-Pats financial planning while they are overseas. Properties available... |
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