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reviews

August 2013

 

Welcome to our August newsletter


The Reserve Bank of Australia (RBA) has cut the cash rate for the second time this year by 25 basis points, bringing it down to a historic low of 2.5 per cent.

According to RBA governor Glenn Stevens, the Board has previously noted that the inflation outlook could provide some scope to ease policy further, should that be required to support demand.

“At the August 6 meeting, and taking account of recent information on prices and activity, the Board judged that a further decline in the cash rate was appropriate.

“The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households,” Mr Stevens said.

Meanwhile, borrowers seem to be remaining comfortable with their loan repayments, with many households ahead on their mortgage repayments.

According to ING DIRECT’s latest Financial Wellbeing Index, 39 per cent of households in New South Wales and the ACT are ahead on their mortgage repayments, while 45 per cent of Queensland households were ahead.

In Victoria, 42 per cent were ahead on their mortgage, while 46 per cent and 51 per cent of South and Western Australians respectively were paying their mortgage down ahead of time.

The findings are supported by Genworth’s Homebuyer Confidence Index, which indicates consumer confidence is at its highest level since the beginning of the global financial crisis, surging by 7 per cent in the last quarter.

According to Bridget Sakr, Genworth’s chief commercial officer, “it appears that consumers are becoming more confident about making repayments, with the index showing that 29 per cent of homeowners expected interest rates to decrease over the next 12 months – compared to 12 per cent who held this expectation in March”.

“The latest Genworth Homebuyer Confidence Index suggests that homeowners realise that current market conditions – particularly historically low interest rates – make buying property and servicing a mortgage a more attractive proposition than it’s been for a number of years.

“However, affordability remains a challenge for those yet to enter the market, with 70 per cent of non-property owners believing the dream of homeownership to be unrealistic,” Ms Sakr said.

With a number of major lenders dropping their rates by the full 25 basis points shortly after the cash rate announcement was made, now is the perfect time to have a financial health check to ensure you have the best offer on the market.

To find out how you can make your mortgage work better for you, give us a call.

Sincerely, the Team at Great Aussie Dream

 
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The perfect team


Property investment can sometimes feel like navigating a minefield, but with a perfect team of experts supporting you, you can ensure you have the best chance of success.

When first starting out in the property game, it is easy to fall into traps and make mistakes due solely to a lack of experience.

Wouldn’t it be great to know the secrets of successful property investing before you take the plunge!

A team of experts will be able to act as mentors, allowing you to make your investment dreams come true without the worry of messing up along the way.

When putting together your ‘perfect team’, it is important to consider your personal goals and find experts who are committed to helping you achieve them.

Building the perfect team
Property buyer/ buyer’s advocate – This person will be your main port of call. Look for someone who has had success building their own property portfolio and who has successfully purchased for clients.

Financial planner – A planner will look after your long-term financial strategy and will advise on superannuation, general wealth issues and the appropriate insurance cover that needs to be taken out.

Accountant – Your accountant needs to specialise in tax legislation as this is a crucial part of being successful through property investment. They should also advise you on the best way to structure your financial affairs – it is important, for example, to consider whether to buy in your own name or in a trust or company.

Mortgage broker – by staying up to date with lending criteria and products, a broker can ensure you get a loan that fits both your financial situation and your long-term goals. If you would like to review your current loan, give us a call today.

But how do you go about finding the perfect fit for your team?

As with all aspects of property investment, due diligence is the key. It is important to remember that what works for one person might not necessarily work for you, so take your time and ensure you choose professionals with whom you feel comfortable.

Once you have chosen your team, you need to highlight your goals from the outset so that everybody is on the same page. You also want to ensure you are gaining as much knowledge from your team as possible.

Listen to the strategies your team implements and the suggestions they make. Ask questions at every stage of the game to ensure you reach your full potential as a property investor.

Finally, review your goals and your team on a regular basis. It is important to ensure that everyone is working towards the same goals and that they are continually acting in your best interests.

If you need help finding the perfect fit for you, chat with us, we’re here to help.

 
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Offset accounts explained


An offset account is a powerful tool that can shave thousands of dollars off your interest and help to pay down your mortgage faster.

An offset account is a transactional bank account that can be linked to your home or investment loan (also known as an offset home loan, mortgage offset account or interest offset account).

Basically, the credit balance of your offset account is offset daily against the loan balance, reducing the amount on which interest is payable.

Let’s look at an example of how this might work. Say the balance of your home loan is $350,000 and you have $5,000 in an offset account. When the daily interest is calculated on the loan by your lender it will be based on a net balance of $345,000. On a 30-year loan, this could save you around $24,000 and one year off the loan term.

While this sounds straightforward enough, it is important to consider whether the structure is the best option for your personal situation.

Offset accounts are most commonly linked with home loans as a means to pay off the loan more quickly.

As the offset account is used to reduce the amount of interest you pay, you want to have the interest reduction against a non-tax deductible debt as opposed to having the offset account linked to an investment loan.

Therefore, if you have both an investment and an owner-occupied property, it would make sense to reduce the owner-occupier debt first as this is not tax deductible.

There are also alternatives to the offset account that should be considered. Instead of having the extra money sitting in an offset account it could be put directly towards loan repayments.

This extra money in the loan is called ‘redraw’ and can be taken out to buy a new home or fund renovations where needed. This redraw, however, will not be tax deductible.

When used correctly, an offset account is an effective ‘come and go’ facility that enables you to make the most out of every dollar.

To find out if an offset account is suitable for your needs, or to find out more about the alternatives, contact us on the details below.

 
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Positive cash flow property pitfalls


Positive cash flow properties may be on every investor’s radar, but many first timers misjudge the amount needed to achieve their goal.

It is important for investors to realise that there is no hard and fast rule that will automatically ensure you have a positive cash flow property.

What works for one person may not work for another – even two properties side by side and achieving the same rental returns could have very different cash flow outcomes.

What many people misunderstand is that it’s not the property but rather the tax outcome you receive that determines whether their investment is positive or negative.

Positive and negative gearing are just two ways to achieve a positive cash flow.

The first way to achieve positive cash flow is to purchase a property in an area where the rental returns are so high in relation to the purchase price that even big expenses don’t wipe out the gain. This is most commonly seen in mining towns.

However, there are several variables that will determine whether or not you have a cash flow positive outcome.

It is important to consider factors such as rates, insurances, repairs and any unexpected expenses associated with an investment property. If after all the expenses are catered for there is still money left over from the rent, then the property will be what is known as ‘positively geared’.

But for newer properties or properties that have had a significant amount of renovation done, it may be worthwhile considering negative gearing.

While rent may not be enough to cover the outgoings, you could achieve a significant tax break from the amount of deductions you have. This would plug the gap between the income and the outgoings and mean you still have money left over.

Tax deductible items may not be obvious, so it is important that you do your due diligence and seek expert advice to ensure the best results.

All items that are movable or removable are depreciable – these include the fence, the kitchen, the bathroom, the tiles etc

The rationale behind this type of tax deduction is that money is being spent in order to generate income – in this case, rent is the income.

It is important to remember that cash flow is only one of the factors to be considered when deciding whether or not to purchase a property. You need to ensure any purchase also fits with your portfolio and overall investment goals.

Need help with an investment property? We’re experts, so please get in touch.

 
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Get your free property reports!


Being able to pinpoint the suburbs experiencing strong rates of growth, or conversely those becoming more affordable, is an essential tool that will help you refine your property search whether you are an investor or home-buyer.

This free pack of Real Estate Investar Affordability and Growth suburb reports, valued at $693, will give you a deeper insight into the trends affecting the suburbs you may be interested in investing or buying in.

Download this pack of seven top 50 suburb reports now to:

  • Identify suburbs experiencing the fastest rates of median growth.
  • Target areas where owning is more affordable than renting.
  • Find suburbs where you can purchase property for as little as $50,000.
  • Avoid the suburbs experiencing declining rates of median price growth which could lead to disastrous financial results.

You will receive these top 50 suburb reports at a national and state level:

  • Smarter to buy than rent suburbs.
  • Cheapest rental suburbs.
  • Fastest median growth suburbs.
  • Best 4 year growth average suburbs.
  • Cheapest suburbs.
  • Biggest 4 year price decline suburbs.
  • Biggest average median price decline suburbs.

These suburb reports are compiled from the very latest data by our partners at Real Estate Investar, and have proven to be a valuable tool for investors and home-buyers with over 50,000 downloads to date.

Take advantage of this free resource today.

 
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Wine review

Heirloom Eden Valley Shiraz 2010

This Heirloom Vineyards Eden Valley Shiraz was created by the very best in cutting edge but old school viticulture and winemaking. Hand tended vines, sorted bunch by bunch, naturally open fermented, basket pressed and stored in well-seasoned first use French Oak barriques.

Being a warm climate Shiraz, this vino with its intense bright purple hue, is a seamless soft and structured red. You can taste lots of blackberries but also a mild dark chocolate spice, and some cream and spice from the French Oak.

An extraordinary Shiraz from the Barossa that will cellar well. Delicious.



Rating : 4.5 stars
RRP : $25.00

 

App review

MoneySmart Financial Calculator

As professional mortgage brokers, we follow strict processes to ensure we are doing the right things by you, our clients. Our industry is governed by the Australian Government agency, Australian Securities and Investments Commission (ASIC).

ASIC have put together this great little calculation app to help with your personal finances. Get instant calculations for your mortgage, investment loan or super. Find out how fast you can save for your next big purchase, whether it's an overseas trip, a home deposit or a new car. 

Use your mobile to get figures fast, and then speak to us about how we can help you get there!



RRP : FREE
Available on :  iPhone, iPod touch, and iPad

 
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Contact us

 
 

 

 

 

 

 

Great Aussie Dream

T 1300 72 68 48
F 02 4733 4115
E info@gad.com.au

www.greataussiedream.com.au

Australian Credit Licence Number: 387787 | ABN: 84129326352

 

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