Australia has earned its place as one of the best places to invest in property. However, there are a lot of things that investors need to consider before making the all-important purchase. This page contains answers to some of the most commonly asked questions about investing in Australian property.
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How do I arrange funds for my investment property and what sort of deposit do I require?
PR Australian Properties will make an application for you in Australia for a 70% to 75% loan. You will require access to 25% to 30% deposit Plus Acquisition costs.
The fees vary depending on what type of work ie self employed or wage earner,
If you have PR in Australia or not.
There are 2 types of loans:
Non-residential: for people who earn their money off shore. The same Debt Service Ratio (DSR) consideration is not the same as it is for locals.
For this type of loan, you will need to need to provide:
a) Proof of identity
b) Proof of income
c) Proof of deposit
Residential: for people who earn their money in Australia.
As a non-residential borrower, you may be able to revert to residential after you have moved to Australia, are earning an income there and have obtained an Australian driver’s license. You may be able to use any increased equity in the property and your own initial deposit to purchase another property or business.
There is a DSR consideration when borrowing in Australia up to 35% of income
What costs are involved?
Every property we show you will have a breakdown of fees detailing the costs of purchase. Stamp duty changes in each state. If you buy house and land ( Residential A) then you will pay less stamp duty as it is only on the land not the construction.
You will be required to pay upfront legal costs, including:
• Legal fees
• Stamp duty
• Rates adjustment
• Search fees
• Establishment fee
• Valuation fee
• Mortgage solicitor fee
• Brokerage fee
• Registration fee
• Stamp duty on mortgage
Sometimes a Risk fee may be included
Once the property is completed, the following costs will incur:
• Management and letting fee between 7.5% and 10% depending on which state the property is in. For holiday rentals, the fees are between 10%
• Body corporate where applicable
• Council rates & water
• Re-letting fee
• Possible monthly admin fee (depending on management group)
• Mortgage payments
On a 30% deposit, most properties will have a shortfall between the rental income and the outgoings for the first few years. Unless you can invest in a Dual Dwelling or an NDIS property.
You can claim any shortfall and costs involved as well as depreciation of construction, depreciation of fixtures and fittings, inspections costs and half of the Acquisition fees.
A typical property will give approximately $15,000 to $20,000 tax claims which can be carried forward until either eventual relocation to Australia or it is offset against capital gains tax.
Who will look after my property?
PR Australian Properties will appoint a Licensed Property Manager.
In the case of units, the people managing it will have bought the Management Rights and have paid millions of dollars in most instances. This gives them a unit and an office, and they will be paid a wage by the Body Corporate and earn the management and letting fee which is between 7.5% and 10% depending on which state.
The Property Manager is responsible for:
• The on-going management and daily operation of the complex
• Tenant screening and necessary checks
• Collecting the rent money and depositing it in your Australian bank account
• Deducting their management fee before banking the money into your account
The lender will have an automatic debit authority to take the monthly payment from your account.
When it comes to house and land packages, the Property Manager will have an office approximately 15 minutes away from your property, and they will arrange the mowing of the lawn which will be taken from the rental income. Alternatively, they will let the tenant do the lawns and charge a little less rental. Many Property Managers of house and land will sell their “rent roll” every few years; they have a vested interest in keeping properties in good condition and always full.
Which areas are the best to buy in?
The points to consider when investing in property are:
• Economy of the area
• Development and infrastructure
• Property cycles (where it is in the cycle)
• Demand for property and supply available
• Population Growth
Our on-going research of the Australian market place ensures that you will be able to achieve maximum profit and takes the guesswork out of finding the right investment property.
What type of property can I buy?
You can buy any property as long as it is new and not second hand. In this case, the definition of ‘new’ is that it has never been registered in anyone but the original developer’s name.
Many think they have to buy “off plan” only but that is not the case.
Who will be my tenant?
35% of all Australians rent their home. You will have a wide selection of tenants as we source areas that have more demand than supply. Name any industry, and that is where the tenants will come from. We also look at the affordability of the area you invest into. New job creation and employment is a very important issue we look at when selecting properties.
The essential component is to ensure that there is work available in more than one industry which is identified through the research done by PR Australian Properties.
What restrictions do I have?
Unless you have Permanent Residence (PR) or Australian Citizenship, you can only buy new property and not second hand property. When you sell, you must sell back to an Australian citizen and not another foreign person. Australians also cannot sell their homes to people who do not have PR. The only exception to the above laws is Integrated Resort status, which will be a resort with a golf club facility.
How much rent income will I receive and how much will it increase?
The average rental yield is approximately 4% gross. Some corporate rentals are higher, with up to 5% net. Having said that – from time to time, we do identify areas with higher rental yields due to differing circumstances occurring in that location. The rental increase depends on where in the cycle your property lies. When the market is peaking, rent prices don’t usually catch up to the higher prices for some time, and then they start to increase. Holiday apartments may give more gross income but the costs are higher so it results in the same net result. With the new NDIS and Dual Dwelling properties, these offer a higher nett return.
What are the pitfalls to avoid?
Here are a few points to take into consideration:
• First and foremost, do not confuse your buying motive. Determine if the property is to live in or for investment purposes.
• Make sure that you take Landlord Protection Insurance. Do not try to manage it yourself.
• Do not buy something using non-Australian thinking. For example, South Africans will tend to want to buy into a security complex as that is
important in their country but not in most parts of Australia.
• Know the mind-set of the people in the area as the prime consideration.
• Follow the market. Don’t try to ask for more than fair market rental.
• Communicate with the property management.
• Never take advice from well-meaning friends and relatives
Being so far aware from there, how do I know what is happening with my investment property?
The newsletters and reports that PR Australian Properties sends out regularly will keep you updated on anything that may affect the property market both negatively and positively. The Property Manager will also conduct two inspections a year with photographs to keep you informed.