The truth about negative gearing

I’m not sure there is a hotter topic in the property space than negative gearing at the moment.


That’s because it could be one of the biggest issues that decides the upcoming Federal Election.


Now, this blog is not a political one.

I’m not here to tell you which party you should vote for, however, as an experienced property advisor I believe I need to explain what negative gearing is and what it isn’t.

You see, there is a lot of misinformation out there about negative gearing, including a false belief that most investors buy property so they can solely reduce their tax.

This is incorrect – if anybody buys property just to minimise tax, they want their head read (despite what Kerry Packer said back in 1991!)

The reality is that negative gearing is not an investment strategy, it is a tax outcome.


Plus, negative gearing applies to any income-producing asset, including shares, and has been a legal taxation deduction in Australia for nearly 100 years.

At the end of the day, gearing is simply the practice of borrowing money to purchase an income-producing asset.

Positive gearing occurs when income is greater than expenses (including interest costs) before tax.

Negative gearing occurs when income is less than expenses (including interest costs) before tax.


Negative gearing is a moment in time


Negative gearing is also a mere taxation moment in time.

What I mean by that is that most investors will become positively geared over time because their rental income should increase while generally their interest costs will decrease during their investment ownership.

In fact, according to the 2018 PIPA Investor Sentiment Survey, about 60 per cent of investors indicated they would be positively geared within five years.

When that happens, they will be making a profit, which ultimately means they will pay more – and not less ­– tax every year.

Negative gearing is more prevalent at the start of an investor’s journey because they generally have higher loan to value ratios or LVRs.

That means that their mortgage repayments will be higher, and their rental income might not be able to cover all the interest costs at the outset.

Also, there are a number of other expenses involved in holding property such as council rates, management fees, and insurances, which are also legal tax deductions for income-producing assets.

It bugs me that the fact that investors pay billions of dollars in Capital Gains Tax each year when they sell their properties never seems to get much air-time.

In fact, PIPA modelling has found that an investor who bought a $675,000 property today would receive about $23,583 in negative gearing benefits over a decade, but they would pay $104,703 in CGT if they sold the asset – leaving the Federal Government with a $81,118 net gain!


Capital growth is key


While you can’t hold an investment property for the long term without the cash flow to see you through, it is not rental income that will make you wealthy.

All the investment properties that we recommend to our clients are chosen because we believe they have strong capital growth potential.

They are generally located in desirable areas of Sydney such as the Lower North Shore, Eastern Suburbs and the Northern Beaches, which are continually in strong demand from buyers.

As we all know, demand is key to price growth over the medium- to long-term.

Labor’s plan to restrict negative gearing is slated to begin on 1 January next year, however, there are a number of things that need to happen for that to occur.


The first, of course, is that Labor needs to win the election.

The second is that the legislation needs to pass both the House of Representatives and the Senate, which does not appear to be a sure thing at this point in time.

Thirdly, Labor wouldn’t be the first political party in the world to change its mind about a policy once it won office, especially if there are economic headwinds.

One thing that is likely to happen if Labor is victorious on 18 May is that the market could experience an upswing while savvy investors buy existing properties to beat the aforementioned 1 January deadline.

That’s because existing investors of any type of property before that date will be quarantined from the new rules.

So, given established property does have a history of higher capital growth over the long-term, it makes financial sense to get in to the market and invest in quality established properties between now and then.


If you would like to get in to the market this year and find out how you can take advantage of the current conditions, please get in touch with STRAND today and ask about our FREE Property Roadmap Meeting to help identify your next move towards buying a property. 

Why Sydney is full of opportunity for property buyers

If you’ve read a paper or real estate news website lately, you’ll have heard that Sydney’s property market is crashing. Property buyers have vanished. Prices have ‘collapsed’ up to 20 per cent or more. It’s a catastrophe!


But what’s really going on?

If you look at the full picture, you’ll see that the current state of play is really just a blip on the radar – a short-term anomaly.

And on the flipside of all the bad news, now is the perfect time to buy real estate that has good fundamentals and exceptional value prospects.


Here’s why.


This isn’t a crash


Prices are down, there’s no denying it. But where is the reduction? It’s not on the intrinsic value of quality Sydney property.

Prices skyrocketed across 2016 and 2017, with buyers in a frenzy thanks to intense competition and a scarcity of stock.

They were paying 15, 20 or 25 per cent above the guide in order to beat everyone else and get their hands on the property they wanted.

This insane activity blew up medians in almost every part of Sydney.


But if you take 2016 and 2017 out of the equation and join the dots between 2015 to 2018, to last year’s apparently horrible market, prices have actually gone up.

Yes – up. So much for that market crash.

In total, prices might’ve come off around 10 per cent across inner markets but they’ve really risen around 60 per cent if you look at the past five to seven years of activity.

For an asset like property, that’s an incredible result.

It’s something shares wouldn’t be able to deliver without wild volatility.


This isn’t a crash. It’s an adjustment. It’s a return back to realistic levels and the true intrinsic value of property.

And it’s a place where property buyers ready to move now can snap up some good deals to hold for the long-term and cash in on the renewed growth that won’t be that far away.


Where to look for value


There is a significant lack of competition in the Sydney market right now.

Selling agents have to work hard to get an offer – any offer in some cases.

But the perception that they’ll do anything and everything just to move stock is flawed.


Vendors are under pressure, for sure. Those on the market do want to get off it. But they won’t shoot themselves in the foot.

My view is the majority don’t need to sell, we’re not in a distressed market scenario.

When property does eventually sell, it’s selling at a fair value that reflects the current state of things.

And similarly, property buyers who come to the table with a stack of conditions, such as needing to sell their current place before settling, or ones without finance, aren’t attractive.


Banks are being tough, as you’ll know.

Those buyers in a position to move now – pre-approved and with no conditions – are in the most exceptional place to make a deal with a vendor who wants to move on.


So, where can you find that value?

We’re looking in the Lower North Shore locales such as Waverton, Cammeray, Cremorne and Mosman.

We’re surfing around the Northern Beaches in suburbs such as Manly, Frenchs Forest, Balgowlah and Fairlight.

And we’re always interested in blue-chip eastern suburbs with character Victorian terraces such as Paddington, Surry Hills and Bondi Junction.


How property buyers should determine value


Value is different to price. The value of a property reflects its investment fundamentals, the current state of play, future demand, and an area’s profile now and later, to name a few.

The intrinsic value of Sydney property right now means prices are about where they should be for current conditions.

For solid property investment opportunities in good areas, values are holding.

Prices are where they were in 2016 before the crazy premiums were splashed around.


As an independent buyer’s agent and property advisor, my job is to determine a property’s true current value so that my clients don’t overpay.

I find the best potential opportunities and look at what they’re really worth.

I then determine the ones that offer the best fundamentals for future growth.

Then look at comparable sales from recent months – not ones from two years ago, when the peak was at its dizzying high and overblown.

I also assess localised demand and stock on market and plot out the likely path of that property in the mid to long-term.

That’s how you find out what a property’s value is now, so you can pay the appropriate reflective price.


There are good deals to be found, for sure, but even in the current market, uninformed property buyers risk making some huge mistakes.

You need all of the information available – and the best expertise and professional advice – to avoid paying too much or investing in something that’s got little or no future potential.


Look at the bigger picture


Would-be property buyers are understandably hesitant at the moment.

They’re umming and ahhing about whether to move now or sit tight.

But really, there has never been a better opportunity to pay a fair price – in some cases to snap up a bargain – before the market bottoms out and begins its recovery.


Plus, of course, buying property should always be about the long-term, not the here and now.

Those who sit on their hands will pretty soon wish, with the glorious benefit of hindsight, that they had picked now as the time to move.

Don’t find yourself with those same regrets.


If you would like to get into the market this year and find out how you can take advantage of the current conditions, please get in touch with STRAND today and ask about our FREE Property Roadmap Meeting to help identify your next move towards buying a property. 

How to create equity in a slower market

It’s true that the market is always ideal for someone, with the current market conditions optimal for upgraders but also for renovators who want to create equity.


A strategy that we often recommend is to buy, renovate and hold so that investors can manufacture capital growth as well as higher rents.

However, there are a number of non-negotiables that you must understand before you begin.


1   Don’t over-capitalise


One of the common problems with renovations is the tendency to over-capitalise.

That means that someone decided to spend far above what was necessary to improve the property’s value and rental return.

Some people get caught up in what they personally like or install high-end fixtures and fittings that are unnecessary.

While each renovation is unique because of its location and the demographic of people living in that area, we do use a calculation to ensure a renovation is going to be worth it.

Say you want to spend $20,000 on a renovation and are using equity to finance it.

The increase in your repayments, based on an interest rate of five per cent, would be about $1,000 per year.

So, the renovation would need to increase the weekly rent to cover these additional repayments, by at least $20 per week. Any additional rent achieved would be bonus cash-flow in your pocket.

Of course, the second part of the equation is the property value uplift, which should also cover the cost of the renovation from, say, a valuation of $800,000 to $820,000 at least.


2   Understand the demographics


One of the most vital steps in successful renovations is an understanding of the local demographics to ensure you are providing what they want and need.

If you’re buying a property to renovate and hold in suburbs such as Manly Vale or Freshwater, you would likely buy an older unit that is need of modernisation.

The reason why you’d select a unit is because there is solid demand from renters in these locations, as well as it being much more affordable than a house.

All renters want a property that is clean, tidy and modern, which means updating some of the fixtures and fittings in apartments that were originally built in the 1970s for example.

Conversely, if the predominant demographic are families in a specific location like Allambie Heights, then you would buy a house because of the demand for this dwelling type from renters.


3   Keep it simple to maximise equity


One of the major problems with “reality” shows like The Block is that they make renovating seem easy, plus they generally are spending big on fixtures and fittings because they’re trying to achieve the highest sale price at the end of the season.

That is never a good strategy for smart investors who should spend wisely whilst also improving the value and rent of their property as much as possible.

One of the most under-rated cosmetic renovations is paint.

It’s amazing how it can transform the interior of a tired unit into a property that will be in demand from tenants.

Ditto, with tiling in the bathroom, because you don’t necessarily have to rip out old tiles.

Rather, you can keep costs down by simply tiling over the existing ones, if they are in good condition, which will also mean you save money on water-proofing.

When it comes to the kitchen, far too many people get carried away with expensive ovens and marble bench-tops or even complete kitchen fit-outs by high-street retailers.

The truth of the matter is that flat-pack kitchens, mid-range ovens and laminate bench tops are just as effective in upgrading a kitchen that has seen better days.

Another idea could be to install a drop ceiling and down lights in old mottled ceilings, which will instantaneously modernise it.


Renovating in slower conditions is the ideal time for savvy investors who aren’t prepared to sit on the sidelines just because the market is taking a breather.

Instead, they are creating their own equity in a property that will be in strong demand from renters.

After about six months, they also usually have the property revalued with the manufactured equity either used to undertake another renovation or towards growing their portfolio.

The smartest ones also understand that adopting a renovate to hold strategy, rather than flipping, will see their financial position strengthen with each passing year.


If you would like to be one of them and find out how you can take advantage of the current market, please get in touch with STRAND today and ask about our FREE Property Roadmap Meeting to help identify your next move towards buying a property. 

Five buying tips to make the most of the Sydney market

Did you know that an average of about 40,000 properties were sold across Australia every month for the past decade?


Of course, a significant proportion of those properties were in Sydney each month, plus the average stats don’t include off-the-plan sales so are technically higher still.

What these numbers mean is that properties are bought and sold every month regardless of the market conditions.

Sellers might need to upgrade to a larger home, or an investor might decide to offload a property in their portfolio – whatever the reason, the fact is that the wheels of the property market keep on turning.

Therefore, with prices softer across much of Sydney and vendors needing to still sell, there are ample buying opportunities to secure great properties for attractive prices.


So, here are five tips to make the most of the current Sydney market.


1 Buying in the same market


Upgraders especially are well placed to make the most of softer prices because they will be buying and selling in the same market.

So, they may sell their current apartment for $1 million in Balgowlah, which might be five per cent less than what they could have achieved last year.

However, they can upgrade to a higher priced house in say Allambie Heights where if the price adjustment has also been five per cent, then the price has reduced by a greater amount.

That means they will also pay less stamp duty than if they had upgraded last year as well as paying a lower price for a premium property.

The caveat is it is best to sell first and then buy because lending is taking a little longer to secure at the moment and there remains solid demand for good properties from savvy buyers, so you don’t want to miss out because of finance issues.


2 Less competition


The reduction in the volume of investors has been well documented, but rather than being a bad thing it is actually rather good.

That’s because fewer investors means reduced competition for properties, which ultimately means a stronger negotiating position.

While sellers are often a little late to the party when it comes to reducing their price expectations, if a qualified buyer is the only one who is interested in their property, well, they’ll have to take a reality check if they want to secure a sale.


3 Better yields


Another tip is that while prices have softened across parts of Sydney, rents have not correspondingly fallen to the same degree.

According to the latest figures from CoreLogic, the median house price in Sydney has reduced by 7.4 per cent over the year to October 2018, but rents have only softened by 2.4 per cent.

What that means is that an investor has more buying power to secure a premium property that is likely to achieve solid capital growth over the long-term while also recording better yields than a year ago.

In fact, CoreLogic figures show gross rental yields have increased by 3.2 per cent in Sydney over the past 12 months.


4 Buying after auction


At the end of 2018 the auction clearance rate in Sydney was hovering around 50 per cent or below, mainly due to sellers not being prepared to meet the market on price.

I had seen a number of properties passed in at auction because too many sellers still had their heads in the property clouds.

In fact, a recent property that had an initial guide price of $1.35 million, went up for auction and was passed in at $1.2 million.

A strategy to implement if the vendor is being totally unrealistic is to wait for the property to pass in at auction and then negotiate with the seller afterwards when hopefully reality has started to sink in.

That same property was then secured for $1.16 million post auction.


5 Expert assistance


Premier locations like the Northern Beaches, the Lower North Shore and the Eastern Suburbs will always be in demand from buyers who want to live there.

The temporary price retraction in play at present means that it is the perfect time to gain a foothold in some of Australia’s most desirable precincts.

Working with an expert can not only ensure you’re securing the best properties for the best prices, but you can also have access to opportunities that have yet to hit the market.


While many people are sitting on the sidelines hoping to be the first person to ever successfully pick the bottom of a market cycle, savvy buyers and investors are making the most of the current buying conditions.

It makes financial sense to be one of them.


If you would like to be one of them and find out how you can take advantage of the current market, please get in touch with STRAND today and ask about our FREE Property Roadmap Meeting to help identify your next move towards buying a property. 

New tenancy laws a sign of the times

The New South Wales Government’s Residential Tenancies Amendment Bill 2018 was passed in October – some three years after the review of tenancy laws was first announced.


The changes certainly caused some heated discussions amongst real estate professionals when they were first announced, with many suggesting that they give too much power to tenants.

Some of the major changes include:

  • Tenants making minor alterations in properties;
  • A new minimum standard for properties;
  • Tenants allowed to get rectification orders from Fair Trading for repairs;
  • Capping rent increases for periodic leases to once a year; and
  • Victims of domestic violence to break a lease without incurring a penalty.


Late to the party with new tenancy laws


Without getting into an argy-bargy about the pros and cons of the amendments, I believe it’s important to recognise that legislation often comes late to any party.

The review of tenancy laws was first announced in 2015 and has been painfully slowly working its way through the necessary legislative checks and balances.

Since that time, the Sydney sales and rental markets have changed considerably with both now experiencing softer conditions in some areas.

Plus, it’s always a tricky path to tread when it comes to balancing the rights and responsibilities of tenants and landlords.


Some of the amendments seem to be relatively benign such as instigating a minimum standard for rental properties.

The requirement to provide a safe rental property has not only been a legal requirement for a long time but it should also serve as the backbone of a landlord’s investment philosophy.

That’s because most investors simply want a long-term tenant who will look after their property and they’re unlikely to do that if it’s in a state of disrepair or, worse still, is a dangerous place to live.

The amendment to allow tenants to make minor alternations to properties, such as picture hooks, is also one that we all know has been happening for a while already under the radar – a bit like a pet whose presence is miraculously erased on inspection days!


A more commercial mindset


While there has been a bit of a palaver about the restrictions on rental increases for periodic tenancies to once a year, the rental market rarely has been strong enough for landlords to do more than that for a long while now.

In fact, the amendments to the tenancy laws have actually made me consider the vast differences between residential and commercial tenancies.

In the commercial sphere, leases are generally much longer, with five years usually the minimum, plus tenants can undertake fit-outs to the premises, which they have to “make-good” at the end, meaning they return it to its original condition.

Also, commercial landlords tend to consider their tenants as customers rather than tenants, because they are more aware of the financial relationship that exists between the two parties.

They actually want their customers to stay for the long-term – hence the longer leases – partly because commercial “customers” can be harder to come by, which might mean longer periods of vacancies and deeper holes in their cash flows.


Savvy residential property investors have this more commercial mindset, too.

So, they tend to try to keep their tenants happy, including realistic rental increases when necessary to ensure their property remains in-line with the market.

Even if their tenant wanted to paint an internal wall, they may even say “yes” as long as it was a modification that would not reduce the value of their holding.

They have developed such a mindset because they know they need to hold their portfolio for years to be able to realise significant capital growth and they can’t do that without customers whose rent helps to repay the mortgage.


A new way of living


Another aspect of the current debate is that the way people are living is changing.

The current softer market conditions in Sydney means that first home buyers are more active than they have been in years.

However, as I wrote about in my blog last month, many people – young and old – are opting to stay renting for longer because of a desire to live in an area that they couldn’t afford to buy in, but where they can afford to rent.

In fact, with Sydney’s population now more than five million people, it seems that our rental market has become more European in its sensibilities.

In the UK, where I grew up, long-term renting was common with people choosing to invest in other more affordable areas or in different asset classes, so they could remain living in a truly global city like London.


So, at the end of the day, I believe that the tenancy laws reform is a sign of the times.

Plus, investors must always consider that if they are to grow a solid portfolio that they can afford to hold over the long-term, they can’t do that without tenants.

And the best kind of tenants are the ones who stay there for years and who treat your investment like their home.


If you are renting at the moment or have outgrown your existing home and considering your next move, STRAND Property Group can help you. As experienced independent property advisors, we have the industry knowledge and tools available to assist you to map out your property goals or help you buy a new property.


Contact us below to discuss developing a property strategy tailored specifically to your personal goals and let us help you become a new landlord:

How to climb the property ladder by rentvesting

Every once in a while a “new” strategy crops up in property circles that becomes the talk of the town.


Once upon a time, investing outside of your home state was considered “new”, whereas now it is a common part of a savvy property investment strategy.

The latest concept to gain traction is ‘rentvesting’, which simply means renting where you want to live and investing where you can afford to buy – although it is not technically new.

Rentvesting has been a successful strategy for sophisticated investors for a while already, because they understood that they didn’t have to compromise lifestyle to become a property owner or investor.


Clearly one of the reasons why rentvesting is more popular today is because of the strong property growth in Sydney and Melbourne over recent years.

With prices up significantly over the past five years, some people have simply given up on their dream of home ownership entirely.

Others, though, have recognised that Australia is a land of multiple markets that have more affordable property than their home cities.


How does rentvesting work?


One of the reasons why rentvesting is so popular is that it allows investors to make the most of the difference in the price of renting versus buying in the same location.

Take a suburb like Cremorne on Sydney’s Lower North Shore for example. The median rent for a two-bed unit is $680 per week, yet mortgage repayments would be around $1,000 per week for the same property. Renting and saving for a 20 per cent deposit, as well as all the other holding costs of owning a property is a stretch for many prospective property owners.

However, buying in a more affordable location such as Brisbane or Newcastle would require a smaller deposit, plus you get to make the most of the tax deductibility of the costs associated with investment property ownership.

Rentvesting also enables investors to benefit from market cycles in other locations, rather than buying into areas that may have already peaked.

That way, they can potentially enjoy capital growth sooner, which they can use to grow their portfolio, or even to purchase a home in a more desirable location.


Detractors of rentvesting as a viable strategy argue that rent money is dead money so why would anyone consider being a tenant for longer than they must?

The only way that thinking is correct is if someone remains a renter for the long-term and does nothing about improving their financial situation in the meantime.

The key to rentvesting success is to make your savings work harder for you by investing in more affordable locations.

Plus, you benefit from remaining in the location where you want to live – just without the hefty price tag of mortgage repayments.


A property strategy for everyone


Rentvesting has become a popular option for Sydney and Melbourne first-time property owners because of the ability to buy into more affordable markets.

However, it also works for upgraders, too.

Perhaps their family has outgrown their current home, so they need something bigger.

Of course, the problem is the high entry and exit costs of buying and selling property.

Say their home is valued at $1.2 million with a $600,000 mortgage, if they sold it to upgrade, they actually won’t end up with $600,000 in their bank account.

That’s because they are likely to be hit with about $120,000 in buying and selling costs, which cuts their nest egg down to $480,000.

Plus, they will need to spend more to upgrade to a larger home, which means their mortgage will potentially be about double what it was – and that will be a huge drain on their cash flow without question.


By adopting a rentvesting strategy, they could turn their current home into an investment property – thus transferring that non-tax-deductible debt into tax-deductible – and rent a larger home in the location of their choice.

Even if they continued to make principal and interest payments on their home loan, which is now an investment property, the cost of renting could be significantly lower than if they had bought in that location.

If that wasn’t enough of a windfall, they have retained all of the equity in their property, which they can use to invest in other locations.

They may even have enough equity to buy two affordable investment properties, which will supercharge their investment portfolio.

At some stage in the future, they may opt to buy a home in their preferred location, but because they have additional equity, the impact on their cash flow will be vastly reduced compared to what it would have been without rentvesting.


As you can see, rentvesting might be seen by some as a flash in the pan, but it is really a long-standing property investment strategy that can make a big difference to wealth creation as well as lifestyle.


If you are renting at the moment or have outgrown your existing home and considering your next move, STRAND Property Group can help you. As experienced independent property advisors, we have the industry knowledge and tools available to assist you to map out your property goals or help you buy a new property.


Contact us below to discuss developing a property strategy tailored specifically to your personal goals and let us help you climb the property ladder:

What to look for at your next property inspection

I’ve always found it interesting that people decide to buy a home after usually only spending a few minutes at a property inspection.


Sure, they might go back one or two more times to solidify their love for the property, but often their decision-making is based solely on how they feel about it.

Even a poor building and pest report might not be enough to dissuade them from pushing forward with their decision.

When buying as an investor, emotion should be kept to a minimum when purchasing property.

What matters most is whether that property fits with your investment strategy and whether it is everything that it seems.

As well as being a property investment adviser and buyer’s agent, I am a qualified architectural engineer and when it comes to property inspections I have an eye for what’s right and what is clearly not.


What do I look for at a property inspection?


At the initial property inspection, I use a checklist to take note of features, defects, positives and negatives of the property on a room by room basis, as well as taking photos, with the outcome communicated to my client afterwards.

On the second inspection, I query any issues with the agent, as well as conduct a more detailed inspection including checking for any cover-ups that may have been done just for the sale – especially bad paint jobs!

I also look for:
• Uneven/unstable floors
• Unsafe decks
• Concrete spalling
• Damp on the bottom of external walls and internal walls behind showers
• Musty smells
• Cracks in walls and floors
• Large trees
• Roof damage.

I try to test everything, such as water pressure and hot water; check to see that the windows and doors open properly; and turn on lights and fixtures.

I even ask the selling agent to provide confirmation in writing that everything is working in the property.


What are some of the most common building faults?


There are a number of issues which can cause headaches for new owners and that’s why knowing what to look for is so critical.

Some of the most common building faults include:
1. Water/damp issues – from poor drainage externally (gutters, downpipes, stormwater), damp subfloor, plumbing leaks internally, roof damage, waterproofing issues, insufficient ventilation.
2. Structural defects – a build-up of the above can cause damage to roof members, foundation walls and floor joists. Large trees with extensive roots can cause damage to drains, footings and slabs.
3. Safety issues – unsafe decks, balconies and balustrades/pool fencing. No electrical safety switches. Presence of asbestos. No smoke alarms or insufficient alarms.
4. Poor quality renovations and illegal additions.
5. Pest infestation – caused by poor maintenance and damp conditions.
6. Termites – about 30 per cent of freestanding homes have had some instance of termite activity, which is why it’s imperative to pay for a professional pest inspection.

One of the many great things about Australia is that we have a wide variety of architectural styles, but that also means there are different defects you need to look out for.

For example, Victorian terraces are prone to poor drainage, rising damp and ventilation issues, whilst other older homes often have sagging ceilings from heavy plaster linings with insufficient fixings as well as timber stumps that are prone to rotting.

It’s not so romantic to own an old home that is leaking, or subsiding, is it!

Of course, this is where professional guidance can help you identify any issues that are not immediately apparent to the untrained eye.


What about vendor property inspection reports?


Inspection reports are often provided by vendors but that doesn’t mean that buyers should rely on that information exclusively.

Depending on the quality of the building report, I usually recommend clients engage their own inspector to ensure independence.

Of course, it is always the buyer’s decision whether to proceed with the purchase, but by working with a professional, buyers have all of the information they need to make an informed decision about the risks of proceeding – especially if the property has any defects.

Successful property buying comes down to multiple factors, including strategy, location and asset selection, but it’s also about ensuring that you don’t buy a dud that’s been dressed up to the nines!


If you’re looking to get help with your next property purchase and would like advice from a qualified property professional, then please get in touch with STRAND Property Group today: 

How is your property advisor getting paid?

No one likes to talk about how much money they’re making, do they? So how is your property advisor getting paid?


When it comes to someone giving you property advice, you must ask that tricky question.

Why is that?

Well, their answer can sometimes be something that you don’t want to hear.


An independent property advisor is key


As I’ve written about before, unfortunately there are people out there who are giving property buying “advice” when really they’re just recommending you buy a property from which they’ll receive a commission for the sale.

Of course, that’s not advice and it’s not what independent buyer’s agents or professional property investment advisors do either.

We are 100 per cent independent and the only person we’re paid by is our client – either for buyer’s advocacy work or for strategic property investment advice tailored specifically to them.

We charge a fee for a service.


Royal Commission findings


Alas, as the Royal Commission into the banking sector has shown, there continues to be unscrupulous operators providing property investment “advice”, but what they’re doing is just lining their own pockets with money from their clients and from whoever is paying them an “incentive” to offload properties for sale.

Most savvy investors have a team of professionals they work with to ensure they’re buying the best properties every time.

This team might involve a buyer’s agent, a mortgage broker, a financial planner, an accountant and a property advisor.

Each one of these professionals have a part to play, but they also shouldn’t give property investment advice if it is not their speciality and especially where there may be an incentive, because of referral fees, to do so.


Industry associations


Associations like the Property Investment Professionals of Australia (PIPA) and the Real Estate Buyers Agent Association of Australia (REBAA) exist to provide practitioners with support and training in each field, but they also require adherence to a strict code of conduct for membership to be maintained.

I am proud to be an active member of both associations as well as being a committee member for the Buyer’s Agents Chapter of the Real Estate Institute of NSW (REINSW). We believe in following the highest professional and ethical standards in the industry, adhering to best practice, and most of all, providing the best available service to our clients.

As well as asking your “advisor” how they are being paid, consumers should also question which property investment industry associations they belong to, which is a signpost of their commitment to ethical practice and to the sector as a whole.


Expertise, not just advice


There is nothing wrong with mortgage brokers, for example, giving general property advice as long as they have the expertise to do so and are savvy investors themselves.

Even with new legislation coming into effect in New South Wales later this year, which requires anyone involved in taking a referral fee for a property transaction to be licensed, this situation is unlikely to change.

That’s because “advisors” will just apply for a real estate licence so they can continue to receive financial kickbacks from a developer, vendor, builder or a property marketing company.

While they might be legally required to disclose their commission that doesn’t mean that it will reduce the number of people who fall victim to taking the property investment “advice” of someone who doesn’t know what they’re talking about.


Which is why you must ask how your property advisor is getting paid.

If any of their fee is coming down the chain from a developer or vendor then you should be very cautious and question if there is a conflict of interest in their advice.

If there is a conflict, then it’s makes sense to delay making any decisions until you have clarity or, better yet, only work with an advisor who is being paid by someone you know very well – and that is you.


If you’re looking to get help with your next property purchase or investment strategy and would like advice from a professional, independent and ethical property advisor, then please get in touch with STRAND Property Group today: 

Why you need to plan for successful property investing

After a period of strong price growth like the one that Sydney has recently experienced, many people mistakenly believe that successful property investing is easy.


Sure, a lot of people have experienced price growth, but many are owner-occupiers who will ultimately have to buy and sell in the same market at some point in time, therefore they never really see the financial gains that they have tied up in their home.

What I mean by that is that while their home might now be valued at say, $1.5 million, if they were to sell and buy somewhere else in Sydney, they would need to spend a similar figure (or more because more people upgrade rather than downgrade) to secure their next property.

Smart investors, on the other hand, understand the benefits of leveraging the equity that they have built up, meaning they can potentially use the increase in value of their portfolio to buy additional properties.


The power of leverage


Sophisticated investors don’t consider the market as a game of chance or speculation.

Rather they have a plan or blueprint to guide them on their journey to financial security through property investing.

That plan involves the development of a property strategy to understand their lifestyle and financial goals as well as determining their preferred investment and property acquisition strategy.

And that strategy involves using leverage to continue to grow their portfolio over time.


Let’s consider someone who had $200,000 in either cash savings or accessible equity within an investment property or their own home.

If that money just stayed put and it grew in value by about five per cent per annum, for example, this would mean it would increase by $10,000.

However, savvy investors understand that if they used, or leveraged, those funds as a 20 per cent deposit to buy a $1 million property in a high demand area like Neutral Bay or Manly, the return could be significantly higher.

In fact, using a five per cent return again, the capital growth on $1 million would be $50,000 in one year – which is five times the return of $10,000.

Their original investment of $200,000 has grown to $250,000 in just one year, which is a return on investment of 25 per cent! This is the power of leverage and cash-on-cash returns.


We can then look beyond the first year and see what happens over the long-term when the annual return is compounded year after year:


Example 1 Savings Example 2 Property
(5% return) Balance (5% return) Balance
Today $200,000 $1,000,000
Year 1 $10,000 $210,000 $50,000 $1,050,000
Year 2 $10,500 $220,500 $52,500 $1,102,500
Year 3 $11,025 $231,525 $55,125 $1,157,625
Year 4 $11,576 $243,101 $57,881 $1,215,506
Year 5 $12,155 $255,256 $60,775 $1,276,282
Year 6 $12,763 $268,019 $63,814 $1,340,096
Year 7 $13,401 $281,420 $67,005 $1,407,100
Year 8 $14,071 $295,491 $70,355 $1,477,455
Year 9 $14,775 $310,266 $73,873 $1,551,328
Year 10 $15,513 $325,779 $77,566 $1,628,895
Year 11 $16,289 $342,068 $81,445 $1,710,339
Year 12 $17,103 $359,171 $85,517 $1,795,856
Year 13 $17,959 $377,130 $89,793 $1,885,649
Year 14 $18,856 $395,986 $94,282 $1,979,932
Year 15 $19,799 $415,786 $98,997 $2,078,928
Cash-on-cash Return $215,786 $1,078,928


When comparing the growth of the two examples you can see the real power of leverage used in Example 2.

The growth over 15 years on $200,000 in savings is around $215,000, but the growth on $200,000 leveraged into property is over $1 million!

While interest repayments on the $800,000 loan will need to be paid, rent from the property investment helps to offset this.


As part of their property investing strategy, smart investors also take a long-term mindset, which means that the returns on that original amount should continue to grow year after year because of the power of compounding.


Is financial freedom a realistic goal?


We hear a lot of about “financial freedom” in the property world, but what is it and is it achievable?


“Financial freedom is achieved when your passive income is greater than all of your expenses after tax.”


Passive income comes from investments, such as rent from properties, but you don’t physically have to work for that money.

Plus, it grows exponentially over time, which means it will cover more of your debt repayments on your property loans for example.


Income earned from a salary, however, will likely never increase at the same rate as it is usually linear and mostly only increases in-line with inflation or a promotion.

What I mean is that income from your job will probably never result in financial freedom, unless you use it to invest in capital growth assets.

The vast majority of Australians rely on the pension in their retirement because of this – even after superannuation is taken into account.

What’s equally depressing is that many Australians might actually outlive their money in their twilight years, due to the increase in life expectancy.


Imagine working hard all your life and then pretty much living in poverty during retirement?

That doesn’t have to be your story, though, if you’re prepared to take action today.


Superannuation or property investing?


Instead of just making voluntary contributions into super and hoping for the best, smart investors leverage into investments like property outside of super that can build their asset base as well as passive income later in life.

They do this because they understand that their money can work harder for them than just earning five to 10 per cent every year within super.

Property investing is a proven wealth creation strategy, which has the potential to create a significantly higher income stream in retirement than super alone.

Plus, it can provide a passive income earlier in life which means you could retire sooner if you so wish.


Of course, it’s important that you assess which strategy is right for you by seeking advice from a licensed financial planner and a property investment advisor.

Superannuation should still provide a cornerstone of building wealth but used in conjunction with investing in other direct assets, which also provides a level of diversification.

At the end of the day, Australia’s ageing and growing population means that the Federal Government’s ability to keep financing the pension is becoming strained.

In the years ahead, that may mean higher taxes for all Australians, which would further reduce their chances of saving for the future.


No one ever saved their way to financial success or freedom.

What they did was create a strategy and a plan to achieve it via investing in income-producing assets that do the heavy lifting for them.


If you want to get started with property investing or have an established portfolio already, STRAND Property Group can help you take the next step in building a more financially secure future.

As experienced property investors ourselves, we have the industry knowledge and tools available to assist you to map out your property and financial goals.


Contact us below to discuss developing a property investing strategy tailored specifically to your financial goals:

How to buy off-market properties

Off-market properties are often considered to be the pinnacle of property buying opportunities.


They are the properties that are not listed publicly or perhaps the owner has the intention of marketing it at some stage in the future but is open to offers from buyers right now.


Why do off-market properties exist?


It can be for myriad reasons such as they want to keep the sale off the radar or they need a quick sale because of a sudden change in circumstances.

The three Ds can often be an unfortunate cause for a quick sale, which include divorce, death or debt problems.

Perhaps they just don’t want the added expense of marketing costs or dozens of people traipsing through their home for weeks on end.


Whatever the reason, off-market properties do exist, and they sometimes can be secured for a good price – even under market value if the vendor’s motivation is a quick sale above anything else.

However, the thing with off-market properties is that most buyers will never know about them and therefore don’t often have the opportunity to buy one.

That’s because it is usually the selling and buying agents who are aware of what’s available off-market in their area.

Over the years, they’ve developed strong networks and relationships, so buyer’s agents are often the first to learn what’s on the market on the quiet so to speak.


A recent off-market purchase for our client


A prime example was a recent purchase we made for a client in Potts Point.

We had already worked with the client to establish her budget as well as the potential buying locations.

That is one of the must-haves when it comes to securing off-market properties – you have to be ready to make a solid offer quickly as well as have your finance pre-approved.

They are not called off-market opportunities for no reason after all.


We learned about the property, which ticked all the requirements for the client, from our existing relationships with selling agents in the area.

The reason why the property was off-market was that it was currently tenanted and originally the vendor was going to wait until the end of the tenancy before undertaking some cosmetic renovations and then sell it via the usual channels.

However, we managed to inspect the property before the end of the tenancy and were easily able to look beyond its minor wear and tear issues.

We then offered a solid price to the vendor, which meant they could avoid the costs of the proposed updates and marketing as well as the headache of listing and selling it publicly.

The vendor was happy with the price, so our client was soon the happy owner of a one-bedroom unit in Potts Point that may have been out of her price range if it had been on the market and therefore attracted competing offers from other buyers.


Pre-market opportunities


Sometimes a property might be “pre-market”, which means it is off-market until the vendor commits to all of the marketing costs and releases it publicly online.

Whether a property is pre-market or off-market, though, there is no question that they provide buyers with an opportunity.

They can potentially secure a good property for a reasonable price – especially if the seller’s motivation is privacy or a fast sale rather than price.


To be in the loop, though, buyers must develop good relationships with agents, have their finance organised, and be honest about their purchase budget.

That’s because, while a selling agent always wants to secure the best price for their vendor, they also usually want that to happen as quickly as possible.

If they end up wasting their time suggesting off-market properties to you that are clearly outside of your price range that goodwill will quickly dissipate.

The other option, of course, is to work with a specialist buyer’s agent who understands the local market, knows the selling agents in the area, and is one of the contacts that an agent will call when one of their listings is available off-market.


If you are considering purchasing a property in Sydney and would like the opportunity to access every property on the market as well as off-market properties, please get in touch with us below:

Contact Us

If you would like to find out how to take the next step towards buying property, please get in touch on:

(02) 8324 7438

Suite 3, Building 6, 49 Frenchs Forest Road East, Frenchs Forest, NSW 2086

PO Box 6220, Frenchs Forest, NSW 2086

Strategic property buying for busy professionals.