Being a responsible investor is more than just buying a property. You will want to make sure that everything you own is protected – from any event. Having insurance is an integral part of owning anything, whether it’s a car, house or just your property contents.
Home owners insurance is required to be able to hold a mortgage, and car insurance is required for a car loan. By finding the right insurance you will protected against any accidents and (hopefully) won’t have to make repayments on a stolen car!
1. Know what you need. The type of cover, payment types, and excess amount all will change the cost of your insurance and what you are able to claim for. To do this, make a list of the major things you want covered and the replacement cost and make sure these are covered by your policy. Examples for home insurance include laptops, sporting equipment and accidental damage. For your car insurance make sure you know all modifications to your car, including bull bars and spoilers.
2. Minimise the premium by considering your payment options. Another great way to save on insurance is by paying your premium upfront. You can also lower your premium by choosing a higher excess, but remember that this will need to be paid in the event of an accident, which could leave you in a harder position down the track.
3. Obtain quotes from a number of companies and assess the amount of coverage that is offered, the cost of cover and the cost of your excess payable. Make use of online car insurance quotes, as they are often cheaper than over the phone quotes.
4. Do you have multiple policies? You may be eligible for a discount if you bundle your insurance products. Contact your current insurer and see if they are willing to make a deal to keep your business by putting all your insurance products with them.
5. Finally, try to find a review about the amount of time it takes to get you payout in the event of a claim. We all hope that we’ll never have to use our insurance, but if you do have to you will want to know that you will be treated fairly by your insurer and be able to get your stolen items replaced quickly.
An equity home loan is a mortgage that is taken over the remaining equity in your home.
Equity is the amount of the property that you own, which isn’t owing to the bank. It is essentially the e between your existing mortgage and the value of your home in the market.
For example, if you buy a property for $200,000 (market value) and you have put a 10% deposit of $20,000, and borrowed the rest from the bank, your equity is currently $20,000. Over the years as the cost of property rises and your property is revalued at $300,000 you still only owe the bank $180,000. The extra $120,000 is your equity.
To release the extra funds that you have made in your investment you can either sell the property, pay back the bank the $180,000 that you owe them and keep the rest, or you can ask the bank to borrow this money with an equity home loan.
A common misconception is that if you aren’t paying principal repayments, that you aren’t growing equity. Principal repayments actually have nothing to do with equity growth.
Equity is actually “grown” when your property price increases. If your property decreases in value, you are losing equity.
What are the Benefits of the Best Equity Home Loans?
Borrowing with a home equity loan means that you will be able to still retain ownership of the property.
As long as you can still service your loan, you will be able to borrow extra this year, and then borrow again in a couple of years when your equity has grown again. If you sell the property you won’t have that collateral to borrow against.
The Best Equity Home Loans can be used like a personal loan. In fact, if you treat it like a personal loan you will come out ahead. Because a personal loan has a much higher interest rate, and a shorter repayment period, your repayments will be higher. With a home equity loan, the main benefit is that you will get lower interest rates and longer loan repayment periods than if you were to borrow unsecured funds in the form of a personal loan. So instead of taking a personal loan you borrow against your home. If you then make payments into your home equity loan as though you were paying a personal loan, you will be paying off your home faster, reducing your interest payable and reducing your principal over time.
As you are borrowing against your property, the costs of a home equity loan can often be written off against tax (check with your accountant).
How Can a Home Equity Loan Help?
A home equity loan can allow you to release extra funds from your property investment. You can use this money for whatever you want, for example, The Best Equity Home Loans can be used for a deposit on a second property, for renovations, to start a business, to buy a car or to pay for education expenses.
What are the Features of the Best Equity Home Loans?
The Best Equity Home Loans usually feature a line of credit feature, which can be used like a credit card.
They have lower interest rates
The home equity loan line of credit allows the borrower to only pay interest on the money actually used. This acts much like a credit card account. There is a limit, and as it is paid, more of the limit becomes available for use
What are the dangers of the Best Equity Home Loans?
Your property investment is used as collateral for the extra money you are borrowing. Should you fall behind on payments the lender may start foreclosure proceedings.
Just like with a first mortagege, if you sell your property, you must first pay the bank what is owed against the property.
The biggest danger is that if you fail to make repayments you will risk losing the property. If your bank forecloses you may lose any repayments you have made as well as extra equity in the property.
How Do You Choose the Best Equity Home Loans?
If you have decided that you want to take out a home equity loan, first decide why you are taking it out and how quickly you are going to pay it back. Avoid taking out a loan just to buy a fancy car, because you will still need to pay it back. It is easy to be tempted to borrow more than you need.
Interview different lenders to find out what features they can offer with their loans, and be aware of the advantages and disadvantages of each loan you look at, and always read the fine print of any contract.
Make sure you can make early or extra repayments to pay off your loan faster and if there are any penalties for paying out your loan early.
Before you sign up for a home equity loan make sure you know what you are signing. Know the details of your loan such as:
• Does this extend your mortagage
• Will your interest rate change?
• What is the penalty for early payment?
You can usually choose between fixed and variable interest. Its up to you to decide which works best in your situation.
As with all financial negotiations, educate yourself thoroughly before committing yourself to contract.
Do you have questions about the Best Equity Home Loans for you? Leave your comment.
Best Equity Home Loans
what is a home equity loan?
A home equity loan is a mortgage that is taken over the remaining equity in your home.
Equity is the amount of the property that you own, which isn’t owing to the bank. It is essentially the difference between your existing mortgage and the value of your home in the market.
For example, if you buy a property for $200,000 (market value) and you have put a 10% deposit of $20,000, and borrowed the rest from the bank, your equity is currently $20,000. Over the years as the cost of property rises and your property is revalued at $300,000 you still only owe the bank $180,000. The extra $120,000 is your equity.
To release the extra funds that you have made in your investment you can either sell the property, pay back the bank the $180,000 that you owe them and keep the rest, or you can ask the bank to borrow this money with a home equity loan.
A common misconception is that if you aren’t paying principal repayments, that you aren’t growing equity. Principal repayments actually have nothing to do with equity growth.
Equity is actually “grown” when your property price increases. If your property decreases in value, you are losing equity.
What are the benefits of the Best Equity Home Loans?
Borrowing with a home equity loan means that you will be able to still retain ownership of the property.
As long as you can still service your loan, you will be able to borrow extra this year, and then borrow again in a couple of years when your equity has grown again. If you sell the property you won’t have that collateral to borrow against.
Home Equity Loans can be used like a personal loan. In fact, if you treat it like a personal loan you will come out ahead. Because a personal loan has a much higher interest rate, and a shorter repayment period, your repayments will be higher. With a home equity loan, the main benefit is that you will get lower interest rates and longer loan repayment periods than if you were to borrow unsecured funds in the form of a personal loan. So instead of taking a personal loan you borrow against your home. If you then make payments into your home equity loan as though you were paying a personal loan, you will be paying off your home faster, reducing your interest payable and reducing your principal over time.
As you are borrowing against your property, the costs of a home equity loan can often be written off against tax (check with your accountant).
How can a home equity loan help you?
A home equity loan can allow you to release extra funds from your property investment. You can use this money for whatever you want, for example, The Best Equity Home Loans can be used for a deposit on a second property, for renovations, to start a business, to buy a car or to pay for education expenses.
What are the features of the Best Equity Home Loans?
The Best Equity Home Loans usually feature a line of credit feature, which can be used like a credit card.
Have lower interest rates
The home equity loan line of credit allows the borrower to only pay interest on the money actually used. This acts much like a credit card account. There is a limit, and as it is paid, more of the limit becomes available for us
What are the dangers of the Best Equity Home Loans?
Your property investment is used as collateral for the extra money you are borrowing. Should you fall behind on payments the lender may start foreclosure proceedings.
Just like with a first mortagege, if you sell your property, you must first pay the bank what is owed against the property.
The biggest risk is that the homeowner loses the property if he/she defaults on the payments.
How do you choose the Best Equity Home Loans?
Before you sign up for a home equity loan make sure you know what you are signing. Know the details of your loan such as:
Does this extend your mortagage
Will your interest rate change?
What is the penalty for early payment?
You can usually choose between fixed and variable interest. Its up to you to decide which works best in your situation.
As with all financial negotiations, know how home equity loans work. Beware of the pitfalls as well as the advantages. Always read the fine print of any contract. The Consumer Credit Protect Act enacted in 1968 requires lenders to disclose all payment terms, interest rates and fees at the beginning of the agreement. Consumers have three days to cancel a contract without penalty. Research the various lending companies and plan a budget well ahead of time. It is easy to be tempted to borrow more than needed.
All types of income producing properties have substantial taxation benefits available to be claimed as a tax credit. Many property investors are missing out on thousands of dollars in tax depreciation deductions. Both new and old properties will attract some depreciation benefit that the owner is able to claim as a tax credit.
A common myth is that older properties will attract no claim. Therefore it is worth making an enquiry about any property. When a property owner has not been claiming deductions for tax depreciation, previous financial years tax returns can be amended.
The Australian Taxation Office (ATO) allows for up to the previous four year returns to be amended, in some instances the ATO may have to pay you money back!
The maximisation of a depreciation claim on any building requires a combination of construction costing skills and an excellent knowledge of Tax Legislation. This rare combination of skills has resulted in a select number of quantity surveying firms specialising in property depreciation.
Quantity surveyors are recognised by the Australian Taxation Office to be appropriately qualified to estimate building costs for the purpose of depreciation. Your accountant should recommend a specialist to complete such a report, to maximise the depreciation benefits from your property.
Depreciation: An Investor Profile
The depreciation benefit to every investor will vary. The following example has been provided as an approximate guide, using the diminishing value of depreciation.
Property:
A two bedroom unit purchased for $400,000
Income:
Rented for $385 per week
Total income of approximately $20,000 per year
Expenses:
Interest, rates and management expenses $32,000 per year
Scenario 1 – No depreciation claim:
Pre tax cash flow
Taxation loss $12,000 = $230 per week
Post tax cash flow (top tax rate of 45%)
Tax refund $5,400
Net cash outlay $6,600 = $126 per week
Scenario 2 – With depreciation claim:
Pre tax cash flow
Tax depreciation $12,000
Cash flow position -$12,000
Total deduction $24,000
Post tax cash flow (top tax rate of 45%)
Tax refund $10,800
Net cash outlay $1,200 = $23 per week
This investor has over $100 extra a week by obtaining a depreciation report.
This demonstrates the after tax effect of applying property depreciation. The property investor in this situation has a bottom line benefit of $5,400 per annum. The benefit is the difference between the $6,600 cost before depreciation is applied, and the $1,200 cost once depreciation is applied.
This profile emphasises the benefit of depreciation. The property investor has made this saving from the same property that has moments ago cost $6,600 for the same period.
The Australian Taxation Office (ATO) differentiates between repairs and improvements.
To ensure the best results are obtained from an investment property, it is important to understand the difference between the two claim options.
Definitions
Deductible Repair: Returning items or property to their original state; an exercise in retaining the value of the item or property. Repairs attract an immediate 100% deduction in the year of expense.
Improvement: Improving the condition of an item or property beyond that of when it was purchased. Improvements are capital in nature and as such, must be depreciated overtime.
Three tests
When determining whether a repair or improvement has been made, often three basic tests are employed. They are:
1. Has the condition of the property been improved beyond the original condition at the time of purchase?
When an item was partially or fully replaced, it needs to be determined whether it was done due to the item being damaged, or done to improve what was previously there.
2. Has the property been established as an income producing property?
The ATO states that repairs must relate directly to the wear and tear or other damage that occurred as a result of renting out the property.
3. Was the asset partially replaced, or replaced in its entirety?
Partially replacing an item, like a fence panel, due to damage or wear and tear, often implies that a repair is being carried out. However, if a fence panel needs to be replaced, but the property owner decides to replace the entire fence (for no apparent reason except to improve the property’s value), this will be classified as an improvement.
Important Points
? When completing repairs, they should be carried out when the property is tenanted.
The ATO will allow repairs as a deduction only if the property is being used for income producing purposes at that time. However, if tenants have recently moved out and repairs need to be made due to damage caused by those tenants, the repairs will also be allowed as a deduction as the damage occurred when the property was income producing. It is also important to consult your accountant when making a repair claim, as it becomes a 100% immediate deduction.
? It is important to note that an initial improvement at the time of purchase will not give rise to an immediate tax deduction. Property investors may be able to claim the cost of an initial improvement under the special construction write-off provision, or create a plant or article which may be depreciated over time, but it will not create an immediate deduction in its own right.
When to Consult a Quantity Surveyor
Before Making Improvements
It is important to consult a quantity surveyor before conducting any improvements as the old structure may be able to be ‘scrapped’. Essentially if an item is scrapped, the written down value of the item can be written off as a 100% tax deduction at the time of disposal. It is a very complex procedure to prepare such reports, the process involved in determining the amount of potential deductions available from a property requires the engagement of a specialist quantity surveyor.
After Making Improvements
A specialist quantity surveyor is able to maximise the depreciation deductions from an investment property when works are deemed to be capital improvements. Under TR 97/25, quantity surveyors are appropriately qualified to estimate construction costs for depreciation purposes. When the total construction cost of an improvement is known, your depreciation specialist can utilise methods that are ATO accepted to maximise depreciation deductions through the apportionment items such as preliminaries, consultant fees and other associated costs.
Buying your first property is a big deal. Buying your first investment property is even harder. You have to get all the right information and advice before you take the plunge. Arm yourself with as much knowledge as you can and you will buy a good property that will go up in value over time and be a good investment. If you don’t, you could end up with a lemon. Here are some tips about buying investment property.
A Guide to Buying Investment Property By Payo W Perry
Despite the recent fall out property investment is still full of potential for making money for those who are willing to do their research and make well informed decisions. The key is to view investing in property as a long term contract and to avoid greed by chasing the promise of a quick fortune. Over time, property has and always will go up in value.
The golden rule for investing in property is to buy in an area of growth, if you cannot afford to do so with your current budget then buy in an area next door to a zone which is growing. Research shows that these are often the areas which will be next in line to experience a rebirth in popularity.
You must also pay particular attention to what facilities lie near by to service each facet of modern life. For example, in terms of shopping is there easy access to a large supermarket? What about computer goods or fashion? Transport is also important and the proximity of an airport especially if you are buying a holiday apartment is highly desirable. Infrastructure such as schools, day care and hospitals become very important if your housing is being marketed towards families.
It’s a good idea to gradually drill down into the details. You can see from the above example that we started with an area of growth and then drilled down into the facilities and infrastructure for each area. You don’t need to be a property expert to make successful business decisions, the most important thing is to get the fundamentals right and to then be patient while the market grows naturally and rewards you with capital growth.
The author has a popular online product review site. Be sure to check out his latest expert report for a Ludwig drum set where you’ll also find lots of information and bargain deals on a child drum set
I have been thinking alot lately about the property market. As the market slows, property prices drop. Strangely, some people refuse to get into the market at this time! Historically, property has always rebounded to higher prices than before a recession. Yes, EVERY single time in history. We all know that history repeats, so here are some investment tips to help prepare you for the next upturn.
A little extra information can always help you to get one step ahead in property investment – especially with a property boom looming.
Real Estate Investment Tips to Prepare You For the Next Upturn
Effective real estate investment tips, when followed properly, can help turn the investment roller coaster into something a lot more predictable, especially in a challenging real estate environment. Though the current market is judged to be somewhat down, it is always the case that it will eventually rebound. Be prepared when it does to move in.
Before beginning investing in real estate, there are a few things that should be learned about such a process.
Start with you own home purchase first. Having your own home –and a mortgage for it — is a great way to learn about real estate markets and even investments. They can teach you about location and also how markets can move up or down in a relative short amount of time.
Before diving in with both feet, take some time to educate yourself on real estate investing. Buy books, CD-ROMs, DVDs or go to a few community college-level investing courses before taking your life’s savings and putting it into the market.
It is important to gather your information from more than just one source in order to protect yourself from any bad information being given out.
Real estate investment experts recommend finding a mentor or an investing partner or club when first starting out.
An investing club is a great way to increase and broaden your real estate knowledge base, while an investing partner can help spread out more of the risk. Additionally, find professional help once you begin investing; which means someone to help manage your investments.
It is a foolish person who does not take the time to learn all he or she can about the market in which they are going to be investing their hard-earned money. For example, buying an investment home in a certain market can give you nice upfront money but if it is not appreciating it will eventually become a stagnant investment.
The purchase of an income producing (positively geared) property in a different market might not deliver enough income to cover all of the costs but will appreciate (ie. produce capital gains) much quicker and in a much shorter period of time then the property that is bringing in an adequate income but might not be increasing in value — or its value might even be decreasing due to market conditions.
The bottom line is that anyone thinking of jumping into the real estate investing markets should really take the time to educate themselves as to the ‘ins and outs’ of real estate. Understanding market conditions and trends is very important, as are learning what it takes to run a professional operation.
Author Lucinda Pryse enjoys writing about various topics, including sports, health, and finance. Visit her latest web site where she discusses various kitchen islands for sale, such as a rolling kitchen island.
The bottom line that Lucinda points out is that education is foremost in property. You absolutely cannot attempt to invest in property without a solid education.
Luckily there is more than one way to educate yourself about property. From seminars to books there is an option to suit everyone.
Common property refers to the areas within an apartment complex or development that are shared between owners. In general, common areas are designated areas of a building or land that are available for use by all occupants, tenants or owners. More complicated common areas exist whereby access to certain common areas is restricted by the entitlement the owner is granted over these areas. Investors don’t often realise that common property areas and items can be claimed as a depreciation deduction. These are legitimate deductions and can be maximised by a specialist quantity surveyor.
How do common property entitlements increase the depreciation benefit?
Common property entitlements can add thousands of dollars to your tax depreciation claim each year, depending on the apartment complex or development. Larger complexes generally have more common property, increasing the depreciation claim. Common property is depreciated in the same way normal plant and equipment items and buildings are depreciated. Plant and equipment items (Division 40) in common property areas are depreciated according to their effective lives and the building (Division 43) is depreciated over 25 or 40 years, depending on when it was constructed. A taxpayer’s interest in a common asset is considered an asset in its own right and is depreciated as such when considering immediate write off rulings. By claiming a percentage of the depreciation on common property, this adds to the current Depreciation claim.
Common property areas include:
? Driveways
? Carpark areas/basements
? Foyers
? Stairs
? BBQ and pool areas
? Gymnasiums
Common plant & equipment items include:
? Lifts
? Lights
? Pool and spa pumps
? Common fire alarm systems
What is a unit owner’s entitlement to common property? How is it worked out?
A unit owner’s entitlement to common property correlates directly to their liability.Common property, in regards to depreciation, is apportioned depending on a numberof things like the size of the unit, its position in the development (penthouse or groundfloor unit) and even its view. When a land surveyor first draws up the plan for a development, they work out each unit owner’s entitlements.
A: The low-value pool is an effective rule allowing an increased depreciation deduction available to most investment property owners. Any asset in a rental property which costs less than $1000 can be included in the low-value pool and written off at an accelerated rate of 18.75% in the first year of ownership and 37.5% each year thereafter. There is often confusion concerning assets which form part of a set when their total cost exceeds $1000. For example, if a house has six sets of blinds, the cost will be around $3000. The total cost does not appear to qualify for the extra depreciation available in the low-value pool, however these blinds will still depreciate at the higher rate as they qualify as individual assets. Dividing $3000 into six makes each blind worth around $500. Therefore the blinds can be included in the low-value pool.
A: Low-value pooling is a way of depreciating plant items which cost less than $1000 or have an un-deducted cost of less than $1000. The following types of depreciable assets can be allocated to a low-value pool:
Low-cost assets – A low-cost asset is a depreciable asset that has an opening value of less than $1000 in the year of acquisition.
Low-value assets – A low-value asset is a depreciable asset that has a written down value of less than $1000. That is, if the opening value of an asset is greater than $1000 in the year of acquisition but the value remaining after depreciating over time is now less than $1000. Assets meeting this classification are placed in an itemised pool.
You cannot allocate the following depreciating assets to a low-value pool:
Assets for which you have previously claimed deductions calculated using the prime cost method.
Assets that cost $300 or less (you can claim assets under $300 as an immediate deduction).
Pooling is used in conjunction with the diminishing value method to maximise deductions in the early years of ownership.
When a tax depreciation report is prepared, your tax specialist should take into consideration any renovations carried out by previous owners.
Even though you may not have carried out the work yourself, there may be depreciation deductions for you to claim.
A thorough site inspection is undertaken on your property and further council searches can also expose previous renovations carried out on the property. Always consult a depreciation expert about your entitlements. Maximising the depreciation available in your investment property may improve your cash flow position each financial year – you’ll pay less tax!
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