Case study: Managing cash flow amid life changes

Optimising your cash flow is crucial to reaching your investment goals, so as your circumstances change, such as marriage, children or a new job, investors need to ensure their loans suit their specific situation.

This was evident for a couple who contacted Momentum Wealth with some concerns about their cash flow.

The clients were expecting their first child and the mother-to-be was planning to take at least 12-18 months of maternity leave.

Given the associated costs of having a baby as well as the upcoming reduction in their household income, the couple were concerned that they wouldn’t be able to meet their repayments for their investment property and their home loan.

They were unsure if they should sell their investment property to cut their overall debt position and reduce their monthly loan repayments.

On review of their situation, our mortgage and finance specialist found that they had previously fixed their investment property loan for 3 years at a relatively high rate.

If the client sold their investment property, they would be up for approximately $25,000 in early repayment penalties for breaking their fixed rate loan prematurely.

This made the sale of their investment property far less attractive. It also prevented them from refinancing their investment loan to a lower rate, for the time being.

When it came to their home loan, the clients were paying principle and interest.

We advised them to change this to interest only at a lower fixed rate for 2 years.

This would give the clients a more predictable repayment schedule while their household income was reduced, and cut their repayment bill by $500 per month.

Our mortgage and finance specialist also talked with the clients’ accountant to discuss a PAYG Tax Variation for their investment property in which they could claim their tax rebate monthly instead of annually.

This would further help the clients by effectively smoothing out their cash flow.

In addition to taking these measures to optimise the clients’ cash flow, our broker helped them create a savings plan based on their budget, to set aside funds for expenses once their household income had reduced.

As a result, they started putting aside a large portion of their income as savings. On top of their existing $20,000 savings, they had aimed to save a further $15,000 by the time the expecting mum would take maternity leave.

By restructuring their loans to suit their personal circumstances and undertaking savings measures, the clients were able to hold their investment property despite the additional cost of starting a family and reducing their household income.

6 questions to ask a sales agent before placing an offer

About to place an offer on an investment property? Here are 6 questions you need to ask the sales agent before submitting your bid.

Before placing an offer to buy your next investment property there is some specific information you need to consider to ensure you’re positioning yourself to secure the best deal.

To gather this information, here are 6 questions you should ask the sales agent.

1) What’s the seller’s problem (i.e. reason for selling) All sellers will have a problem they need solved. As a buyer, you’re more likely to secure the property if you can help solve the seller’s problem. Properties are sold for many reasons, such as divorce or a job transfer. To understand the best solution to the seller’s problem you need to know as much as possible about why they’re selling. For example, if the seller has purchased another house and is close to settlement, they may be under time pressure to sell their old property. If they don’t sell their old property they may face financial stress and therefore are more likely to accept a lower offer if you offer a shorter settlement.

2) How was the asking price determined? The sales agent will mostly tell you that the price is based on comparable sales. If this is the case, ask the sales agent for which sales specifically so you can compare these yourself. If the sales agent has a justifiable case for comparable sales, then there should be no reason why they wouldn’t provide this information. In some circumstances, the sales agent might tell you it’s the seller’s price. It’s important to note their body language, mannerisms and comments as to whether they think it’s overpriced.

3) How long has the property been on the market? If the property has been on the market for a long time, other buyers will automatically think that there’s something wrong with it and immediately discount it. Often the only reason the property hasn’t sold is because it’s overpriced. In these circumstances, the seller’s motivation level may change and drop their price if they haven’t received any offers. In these circumstances, you can place an offer on the property but if it’s rejected, tell the sales agent you’re interested and to keep you in mind should the seller change their price expectations.

4) Have any offers been made already and when? This will help you form a price range that the seller may accept. For example, if the property is listed for $530,000 and the seller last rejected an offer of $500,000, then they’re not likely to accept a lower offer today. This is unless the offer was made some time ago, and the seller’s motivation levels may have changed.

5) Why do you think the property hasn’t sold? If the property has been on the market for some time, ask the sales agent why they think it hasn’t sold. The selling agent may indicate that the property is overvalued, it isn’t presented well or there is a flaw with the property. The answer will most likely imply that the asking price is too high which will play into your hands when placing an offer.

6) What’s the lowest price that you think the seller will take? Many sales agents will respond by quoting the advertised asking price however some may reveal that the seller is prepared to go lower. It will largely depend on the sales agent as well as the circumstances, i.e. if the property has been on the market for a long time and hasn’t received any offers.

These 6 questions will help you to gain a clearer understanding of the seller’s motivations, your potential competition and the property’s market history, which you can take into account when determining your offer.

By understanding these factors, you can place yourself in a much stronger position to secure a much more favourable deal and potentially save yourself thousands of dollars.

Making sense (and dollars) of split coding

Split coding can be a cash cow for developers. However, given each council controls their own planning policy, investors must be aware of the differing criteria needed to attain the higher coding.

When purchasing a property in Perth with plans for future development, it’s important to hold a comprehensive understanding of the local council planning policy and scheme to ensure the property meets the necessary criteria.

The most common form of strategic planning used to help guide development is through the use of split-density ‘dual coding’ (for example R20/40).

This split coding is then coupled with criteria that has to be met in order to obtain the higher coding. If this criteria is not met then property developers can only attain the lower code.

Because each council is in charge of their own planning policy, the zonings and associated criteria needed to meet the higher codes vary significantly from council to council.

For example, below are several Perth councils that have introduced split coding in the past 5 years. From these examples it’s easy to see the vast differences in local council planning policies.

City of Joondalup – Allows for the higher of the dual-density coding to apply when the lot/development meets 4 specific points. A major point that influences property investment selection is the requirement of a minimum 20-metre frontage for multiple dwelling developments and a minimum lot width of 10m for all lots, with the exception of battle axe sites.

City of Belmont – Allows for the higher of the dual-density coding to apply when the lot/development meets 13 criteria. The 2 major points that influence property investment selection include the requirement of a 16-m frontage or greater, and a minimum of 50% of the dwellings constructed must be double storey to achieve the higher coding in the zones R40 and above.

City of Wanneroo – Allows for the higher of the dual-density coding to apply when the lot/development meets 2 criteria. These points aren’t overly influential in site identification as they orientate around the planning of the development lay out with the requirement of only a singular crossover.

It’s not uncommon that investors purchase a property with split coding to find out later that it doesn’t meet the dual-density criteria needed to gain the higher coding.

This can severally affect an investor’s strategy and may set them back significantly in their financial goals.

Therefore, when considering buying a development site with split coding, it’s important to understand the criteria needed to meet the higher coding and apply this to the proposed property when completing feasibility studies.

Success is the sum of details: Property condition reports

Property condition reports are designed to protect the landlord and their investment as well as the tenant. But what exactly should be included in the report?

A property condition report should be completed at the start of every tenancy to record the condition of the premises, and signed by both the tenant and landlord (or the property manager if one has been engaged).

While it might not be the most exciting part of property investment, it’s important to conduct a thorough inspection to ensure you have proof of the state of the property as well as a full list of the inventory included in the lease.

So what exactly should the property condition report include?

• A full description of the window treatments (i.e. wooden venetians, vertical blinds etc) in every room
• A full description of the light fittings in every room
• The colour of carpets and walls, outlining any marks or damage
• A list of appliances included in the lease as well as the make and model and their working order
• Any furniture included and its condition
• General condition of each room
• Any noticeable damage inside and outside the house

When it comes to property condition reports, the more detail the better as this will help to avoid or overcome any disputes.

It’s also advised to take plenty of photographs as these can be used as evidence.

Failing to adequately describe the inclusions, fixtures and fittings can cause unnecessary disputes at the end of the tenancy or lead to a possible financial loss for the property owner.

As well as detailing the condition of the property, it’s important that the premise is presented in a clean and safe condition from the outset.

At the end of the lease when the tenant is vacating, they are required to leave the premise in the same condition as it was found, allowing for fair wear and tear.

If the property was not initially presented well then the tenant can leave the property in the same state and condition.

If you’ve engaged a property manager they will take care of the property condition report on your behalf, and a good property management firm will have thorough processes in place to protect the landlord.

Suburb snapshot: Edgewater

About 94% of housing stock in this Perth suburb is low-density dwellings, however that’s set to change following the recent introduction of higher-density zoning.

Edgewater is located in the City of Joondalup, approximately 23 kilometres north of the Perth CBD.

Development of the area dates back primarily from the early 1970s with significant residential development occurring during the 1970s and 1980s.

The area is majority low density with about 94% of stock identified as houses.

However, this is set to change following recent rezoning around the suburb’s train station to R20/40, which will allow for more medium density housing stock.

The area features very high amenity being close to Lakeside Joondalup Shopping Centre (2.5km), Joondalup Health Campus (3km) and high liveability being 5km from the beach and bordering Lake Joondalup with plenty of walking and cycling trails.

About 4,500 people live in Edgewater with a median age of 41 years, and the suburb’s median house price is $560,000.

Edgewater Primary School and Mater Dei College are located in the suburb, while Edith Cowan University Joondalup Campus is located immediately north.

Residents in the area will benefit from the new $29.5 million multi-story car park being built at Edgewater Train Station, which is due later this year.

There are also plans for longer term redevelopment of Edgewater Quarry, including botanical gardens, adventure playground, picnic and BBQ areas, amphitheatre and associated commercial uses, such as cafes.

About 82% of properties are either fully owned or being purchased, with 16% of properties being rented.

About 22% of the suburb’s residents identify as professionals (WA 19.9%), 18% as clerical and administrative workers and 18% as technicians and trade workers.

The suburb is bound by Lakeside Drive in the north, Lake Joondalup in the east, Ocean Reef Road in the south and the Mitchell Freeway in the west.

The main arterial roads include the Mitchell Freeway, Ocean Reef Road and Joondalup Drive, and neighbouring suburbs include Joondalup (north), Woodvale (south) and Heathridge (west).

Seminars prove popular with investors

More than 100 eager property investors and enthusiasts turned-out for Momentum Wealth’s latest seminar, ‘The changing face of property investing’. If you couldn’t make it, we’ll be holding our final seminar for 2016 in the coming weeks!

The latest seminar, which was held last week in West Perth, explained the benefits and setbacks of various property investment strategies and how to apply these in today’s property market.

The seminar also provided insights into the differences when investing in hot and cool markets and why it’s important for investors to understand the cyclical nature of property markets.

With more than 100 guests, the seminar received highly positive reviews scoring an average 9.1/10 from attendees.

Momentum Wealth launches new syndicates

Momentum Wealth has launched its latest residential development syndicates, which comprise two boutique apartment projects.

The first syndicate, the Momentum Wealth Red Gum Fund, is a develop-and-hold investment in which investors can acquire a finished apartment at wholesale prices – circa 15% under market value.

Investors in the Red Gum Fund can choose to sell their apartment at completion to realise the returns, or hold the dwelling to lease and receive strong rental yields as well as long-term capital growth prospects.

The minimum investment for the Red Gum Fund is $150,000 and the fund is forecast to have a term of investment of between 16-24 months.

The second syndicate, the Momentum Wealth Golden Wattle Fund, is a develop-and-sell investment, in which the apartments are constructed and sold with funds returned to investors at completion.

Target returns for investors are between 15-20% per annum and the fund is expected to have a term of investment of between 24-36 months.

The minimum investment for the Golden Wattle Fund is $100,000.

For more information on the Golden Wattle Fund, or to register your interest, follow this link.

These latest syndicates are part of the Momentum Wealth Growth Series of Syndicates, which also feature the Silver Bark Fund – a 16 apartment, 3 townhouse development which is expected to be completed later in 2016.

The Momentum Wealth Growth Series of Syndicates also includes the Silk Oak Fund – a 40-unit apartment project which was launched earlier in 2016 and raised more than $4 million.

If you couldn’t make the event, the next Momentum Wealth seminar for 2016 will be held on October 18 and those interested are encouraged to register their interest.

The next seminar will focus specifically on property development and feature a panel of experts from a range of industries, including architecture, accounting, law and property.

The panel will cover a number of issues related to property development, including managing cash flow and financing during development, what’s ahead for Perth’s multi-residential market, what impact councils are having and if there is an oversupply of apartments in Perth, among many other issues.

There will also be dedicated time for a Q&A session in which members of the audience can ask the panel their own questions.

Keep an eye out for more information on this upcoming seminar or you can register your interest by emailing info@momentumwealth.com.au

New breed of industrial tenants bring different demands

Perth’s burgeoning logistics industries are benefiting from a raft of major road upgrades, which is having flow-on effects for the city’s industrial property market.

In a bid to accommodate Perth’s forecast population of 3.5 million people, the state government has been proactive with infrastructure improvements that will help make the city a more efficient place to work and live.

The state has identified infrastructure spending to be a priority in its 2016/17 budget released in May.

Approximately $1.8 billion in 2016/17 will be spent on upgrading road infrastructure with an estimated $5.9 billion for the 3 years to follow.

Many of these road infrastructure projects are designed to support key industrial areas, making industry more cost competitive.

Such projects include the recently completed $1 billion Gateway WA development and the future construction of the $1.6 billion Perth Freight Link and the $1.1 billion North Link.

Together, these projects will create greater accessibility for many prime industrial zones linking the Fremantle Port, the Perth Airport and key metropolitan and regional markets to the city’s north and east.

The burgeoning transport and logistics industries, which are continuing to grow on the back of e-commerce, will benefit most from this improved road infrastructure.

These industries are helping to fill part of the gap in the industrial property market left by mining services firms, who have downsized or closed in the aftermath of the state’s mining boom.

The rise of the transport and logistics industries is good news for investors as this increased activity is helping buoy the industrial property markets.

However, as the state’s economy continues to transition away from the resources sector, these new industrial tenants require different property specifications.

This includes changes in truss heights and office/warehouse proportions that are more conducive to warehousing operations over engineering type uses that were required by mining services firms.

This has promoted a form of ‘design and construct’ investment where tenants are dictating the building configurations to landlords/investors so properties are built to their needs.

Investors with existing industrial properties need to be aware of the requirements of this new breed of tenant or face long vacancy periods because of outdated fitouts and property specifications.

Deal makers and deal breakers

Here we take a look at some of the different properties on the market and explain why they’re either deals (that represent a good investment) or don’ts (that should be carefully avoided by investors).

Deals

Bibra Lake Purchase price: $485,000 Purchase date: June 2016 Block size: 718sqm Specification: 3 bedroom, 2 bathroom, 2 car bay house built in 1979 zoned R20

Deal: This property makes a good investment because it was purchased under market value, was in good condition and holds future development potential. The property is currently zoned R20 but is subject to rezoning as a draft R40, which would provide significant development upside and high capital growth prospects. The interior has also been recently renovated meaning the buyer wouldn’t have to spend much, if any, money to be able to rent the property. It would also allow the buyer to rent the property until the rezoning is gazetted, at which time redevelopment could be completed. At $485,000, the property also represents good value given Bibra Lake has a median house price of $556,000.

Mount Lawley Purchase price: $1,635,000 Purchase date: July 2016 Block size: 1,181sqm Specification: 4 bedroom, 3 bathroom, 2 car garage character house built in 1927 zoned R12.5

Deal: This property represents a good investment because it was purchased under market value and features a high land component in close proximity to the Perth CBD. The property also features high nearby amenity, such as Beaufort Street café strip and local parks. The house has been renovated to a high specification and features a below ground pool and rear building with a workshop, pool room and bathroom.

Bassendean Purchase price: $520,000 Purchase date: June 2016 Block size: 809sqm Specification: 4 bedroom, 1 bathroom, 2 car carport house built in 1925 zoned R20/40

Deal: This property makes a good investment because it was purchased for under market value, holds a large land component that can be developed and is in walking distance to the Bassendean train station. The property is also in good condition allowing the buyer to rent the property until such time that they’re ready to redevelop.

Don’ts

Cloverdale For sale price: $495,000 Block size: 387sqm Specification: 4 bedroom, 2 bathroom, 2 car garage front duplex

Don’t: This property doesn’t represent a good investment because it’s located under the Perth Airport flight path, it is surrounded by state housing and is in an area with a high supply of similar product, which would contain future capital growth. The property is also brand new meaning much of the value of the purchase price is in the dwelling, which is a depreciating asset.

Property Finance Strategies: Webinar

Did you miss our recent webinar on the best property finance strategies for investors? Don’t worry, you can still listen to the recording here.

Momentum Wealth recently launched our Foundation Series Webinars, which are free, bite-sized sessions of practical and relevant strategies to help investors make smarter, more informed decisions to build their wealth through property.

The first webinar in the series, Property Finance Strategies – Maximising your Opportunities, was held on Thursday, June 23.

The webinar provided listeners with some of the best finance techniques and structures to optimise their property portfolios.

The webinar included:

• Key finance strategies for property investors: looking beyond interest rates
• Understanding lending criteria: how to use it to your advantage
• Cross collateralisation: what every property investor should know

• If you missed the webinar, simply follow this link where you can listen to the session at your leisure.

Keep an eye out for the next session in our Foundation Series Webinars later in 2016.

Capital growth vs cash flow – what’s better?

It’s a common question among property investors; what’s better, capital growth or cash flow?

Generally speaking, there are 2 models of property investment that are available to investors.

1. To buy properties that will increase in price above market rates of return (i.e. high capital gains)
2. To buy properties that offer rental returns above market rates of return (i.e. high cash flow)

In residential property investment, it’s not often that you’ll find properties that offer high levels of both capital gains and cash flow. Generally properties with high growth expectations come with lower rental yields.

Therefore, investors will need to focus on properties that provide one over the other.

What’s the better option, capital growth or cash flow?

It all depends on your current circumstances, but there are a few considerations to take into account to know where you fit.

Do you want to increase your personal wealth, or do you want a source of income?

If you want to significantly grow your personal wealth, then you should choose a capital growth strategy.

As a general rule of thumb, capital growth is best for investors aged between 20 and 60, who are still accumulating their wealth.

Buying high growth properties will allow these investors to capture the benefits of compound growth as their properties rise in value and amass significant personal wealth.

As you near retirement, you should‘ve created the wealth required to live the type of lifestyle you want.

However, you’ll also require a source of income if you’re no longer working.

This is when a cash flow strategy is necessary as investors can utilise the rental returns as a means of passive income.

It’s important that investors work with a property investment advisor who can advise you on the most suitable properties for your own circumstances and stage of life.

Water connections fees slashed for developers

Investors developing property in Western Australia have been handed a welcomed gift with the cost of water connection being slashed by nearly half.

Under the changes, the state’s water supplier, Water Corporation, will reduce charges applied to providing water to new developments or subdivisions by 47%.

For a standard lot, the cost would be reduced from $4,064 to $2,150 per lot – a saving of approximately $1,914.

The reduction is great news for all property investors with the impost being a considerable cost, particularly on smaller developers.

The savings has been slightly offset, however, with wastewater charges to increase by 71%, from $1,363 to $2,334 – an additional $971.

The changes, which took effect on July 1, 2016, were foreshadowed in the 2016/17 State Budget which was released in May.

The changes reflect a reduction in costs incurred by the Water Corporation, which has been working closely with industry to reach the outcome.

5 tips to manage a rent reduction

Ebbs and flows are a natural part of any property market, but how do you manage a rent reduction when forced to find a new tenant in a downturn?

When the market cools and you need to find a new tenant, more often than not the only way to lease your investment property will be to reduce the rent.

While no investor wants to lower their rent, it’s best to be realistic otherwise you may face much larger consequences.

Here are 5 tips to help manage a rent reduction.

1. Take a long-term view. While rental income is needed to service your debts, the main goal of property investment, for most, is capital gains. Typically, a drop in rent won’t make a big difference to your wealth goals over the long term.
2. Don’t chase the market down. If you price your property too high at the start, the market may drop further and then you’ll need to lower your price even more. It’s best to be realistic up front when you are leasing.
3. Think about the bigger picture. If you refuse to adjust your rent to the market conditions, you’re more likely to lose more money through a longer vacancy period. By adjusting your rent appropriately, you should lease the property much faster.
4. Put a rent reduction into context. If interest rates have dropped in line with property market conditions, you’re likely to be paying less on your loan, so a lower rent may not hurt your hip pocket as much as it may seem.
5. Utilise your cash buffers. Investors should have adequate cash buffers that they can access to service their loans when their properties are vacant. Ideally, investors should have enough funds to service their debts for at least 2 months.

If you’re a relatively new property investor and only ever seen your rents rise, then accepting a rent cut can be a bitter pill to swallow.

However, seasoned investors will know that ebbs and flows are a normal part of property and it’s best to adjust rental prices accordingly and wait for the next upswing in the market.

Suburb Snapshot: Warwick

Recently being rezoned to accommodate higher density housing, Warwick boasts good access to the Joondalup train line, great amenities and is in close proximity to the Perth CBD.

Located in the City of Joondalup, Warwick is 13 kilometres northwest of the Perth city centre and has a population of about 3,800 with a median age of 42 years.

More than 81% of properties are either fully owned or being purchased with just 15.5% of properties being rented.

One of the suburb’s main features is its access to Warwick train station on the Joondalup train line as well as the main arterial roads, Mitchell Freeway, Warwick Road and Wanneroo Road.

Until recently the suburb was zoned mostly low density residential R20. However, under the City of Joondalup Local Housing Strategy, significant areas of the suburb have been rezoned to medium density with land around Warwick train station and Warwick Grove Shopping Centre being rezoned R20/60 and R20/40.

The suburb is dominated by stand-alone dwellings with houses making up 91% of stock in the suburb, followed by 4% duplex, villas and townhouses and 5% flats, units and apartments.

With the introduction of higher R-codes, this composition will start to change, however, as older stock is replaced with medium density dwellings.

Residents can enjoy significant parklands with the large Warwick Open Space to the east of the suburb, as well as Hawker Park and Ellersdale Reserve.

Both Hawker Park Primary School and Warwick Senior High School are located within the suburb as well.

Of Warwick’s population, about 23% of people employed over the age of 15 identify as professionals (WA average is 19.9%) while clerical and administrative workers make up 16.9% of the residents and 15.5% are technicians and trade workers.

Show me the money!

Residential development syndicates can be a lucrative investment. But how long does it take to receive returns from a syndicate?

No doubt you’ll be aware that syndicates can be a great investment to create significant wealth in a short period of time.

So how long does it take to receive my returns once I’ve invested in a residential development syndicate?

The answer will be dependent upon two main factors – the company overseeing the syndicate and the size of the development.

At Momentum Wealth, we typically offer syndicates that complete boutique apartment developments, which can be classified as complexes of 50 units or less.

These types of developments provide a more niche product in the market and generally carry less risk than much larger projects that comprise hundreds of apartments.

One of the key criteria we seek to meet when completing residential development syndicates is to return investors’ distributions as quickly as possible.

For our boutique apartment developments, we typically provide a timeframe of around 30 – 36 months in which investors will receive their returns. That is, from when an investor initially commits their funds through to planning, development and sales. However, this varies from syndicate to syndicate.

It’s important to do your research before committing to a syndicate to ensure the company is capable of executing exactly what they’re promising. Do they have a good track record of delivering such projects and have they stuck to budgets and timeframes in previous syndicates?

By failing to complete adequate research you may be left waiting longer than expected for your returns, or worse, you may not receive them at all.

Case Study: Overseas buyer mandates tight deadline

Part of the benefit of engaging a good commercial property buyer’s agent is their ability to foresee and address challenges before they arise.

This was particularly evident in a recent deal for an overseas client that contacted us to find him an industrial property in the Perth metropolitan area.

The client, an English-born Australian resident living in Qatar, provided a specific mandate to our consultants for a small industrial property for private use that comprised:

– Highest possible trusses – Sea container access – The ability for light fabrication – 180-200sqm in size – General industrial zoning – Located in the northern industrial belt – Under $400,000 +GST

The client also had one more directive – he needed to secure the property in just 4 weeks’ time.

With this criteria and the looming deadline in mind, our consultants launched a short 2-week request for proposal campaign and liaised with their extensive network of commercial selling agents, property managers and fund managers.

At the end of the campaign, our consultants compiled a shortlist of potential properties, which we inspected, appraised and provided a detailed price comparison guide before recommending a premise in Malaga, about 13 kilometres north of the Perth CBD.

With the client happy to proceed with the acquisition, our consultants were on a tight deadline to negotiate the deal, and to make matters more challenging settlement was likely to fall in a key holiday period, which may have delayed proceedings.

We also liaised with the selling agent and the vendor to confirm they were organised for a quick settlement and managed the client across 3 time zones so he was prepared to travel to the Australian consulate in Dubai to submit the necessary paperwork on time.

With the lender’s valuation coming in as expected, the client’s finance was approved and settlement proceeded.

After the vendor placed the property on the market for $395,000 +GST, we were able to secure the premise for $365,000 +GST and get the deal across the line.

Needless to say, our client was extremely happy with the outcome, particularly given the tight deadline.

4 tips to minimise your tax bill

Tax deductions for property investors are widely known but rarely understood.

Given the complexity of the matter, understanding the tax deductions you’re allow to claim can become overwhelming.

However, for property investors it pays to be familiar with the ins-and-outs because you can literally save thousands of dollars.

Here are 4 ways to minimise your tax bill.

1) Income splitting for couples

Structure your asset holdings so that the lowest amount of tax is payable, while continuing to optimise wealth creation. Property is expensive to transfer and restructure so you need to plan ahead before you purchase. As a general rule of thumb, negatively geared property should be in the name of the highest income earner while positively geared property should be in the name of the lowest income earner.

2) Maximising depreciation claims

Items deemed ‘plant and equipment’ on your investment property are depreciable items and are treated separate to the building. To minimise your tax, understand what is classified as plant and equipment as well as these item’s depreciation rates. In some specific circumstances, the building is also a depreciable asset. This is for residential buildings where construction commenced on or after July 18, 1985 or where construction of structural improvements started on or after February 27, 1992. Most investors use a quantity surveyor to provide them with a depreciation report.

3) Travel expenses

In some circumstances, travel expenses can be deductible, such as meals, transportation and accommodation. This may allow investors to claim such expenses when inspecting interstate investment properties. However, this is only the case if it’s the predominant reason for travel and if the travel coincides with private holidays, the expenses must be apportioned.

4) Investing via SMSF

The main advantage of investing via SMSF is the low tax rates – superannuation funds only pay 15% income tax and 10% tax on capital gains during the accumulation phase and 0% tax in pension phase for most investors. However, SMSFs aren’t for everyone as they can be costly to establish and maintain. Investors need to consider the pros and cons of investing via SMSF and if it’s an option that suits their strategy.

Want to learn more about property tax and investment strategies? Register for our upcoming webinar, Property Finance Strategies: Maximising your opportunities.

Please note: Momentum Wealth and its affiliated entities are not accountants or financial planners. While all information is provided in good faith, you should seek your own independent advice in relation to all tax matters.

Which is more important – location or property type?

It’s a common question among many investors – what’s the more important decision, choosing the location or the type of property when buying my next investment?

With literally hundreds of suburbs in each of Australia’s major capital cities, property investors have a huge range of choice when it comes to picking the location for their next acquisition.

Similarly, there is a large variety of property types to choose from, whether it be stand-alone dwellings, villas, townhouses, development sites or apartments, and then do you choose newly built or established?

So what’s more important, the location or the type of property?

The answer will largely be dependent upon your property investment goals, which, for most people, is to generate capital growth and a solid rental income.

For capital growth and strong rental demand, the location of the property is typically the most important aspect.

However, the location will generally have to work hand-in-hand with the property type.

A location may only make a good/bad investment if you hold the right/wrong property type.

For example, take:

• a stand-alone dwelling
• on a large lot
• in a suburb where land is scarce
• but apartments are rife

Provided the macro and micro-economic factors stack up, this stand-alone dwelling would generally make a good investment because of its large land component. On the other hand, an apartment in the same area would likely underperform because there is so much similar stock in the area.

It’s also important to consider your unique circumstances, such as financial capacity, risk tolerance and life circumstances.

If an investor is financially constrained and has a low tolerance to risk, a development site may not be the best option.

Want to find the best investment property that will suit you?

Advisors key to smart developments

Think property development is too hard? Well, think again. By surrounding yourself with a good support team of specialists, it’s much easier to build a highly profitable development project.

Developing a property doesn’t mean you have to go it alone. In fact, smart property developers will engage a team of specialists to provide advice to achieve the best outcome.

It’s much the same as engaging a financial planner, a stockbroker, an accountant or even a personal trainer for that matter.

You seek out these professionals because they’re experts in their fields and can recommend the best course of action to achieve your goals, whatever they may be.

Property development is no different. It’s important to engage professionals that can minimise the risk of a development while maximising returns.

But like any advisors, various property development advisors will provide varying degrees of service – some bad, some good, some exceptional.

So what questions should you ask yourself to ensure you’re engaging the right advisors? Here are a few key questions to know you’re receiving the best advice.

Is the company a builder or a development manager?

• If the company builds the development for you, there’s no competitive tendering process when awarding the work so you’re unlikely to be receiving the best price. Alternatively, a project manager will be able to tender the work to several building companies and award the company with the most competitive bid. Therefore you should engage a development manager.

Does the company have in-house specialists who understand building requirements from council-to-council?

• Specialists who understand local building requirements, such as planning specialists, are essential to maximising the development potential of your site. A company that has planning specialists in-house will be able to optimise the design of your development and may be able to find ways to include more dwellings on your site, which can lead to higher returns.

Does the company have in-house research specialists?

• If you own an existing development site, research specialists will be able to recommend the best products to suit that area. Alternatively, research specialists can find highly profitable sites conducive to development that will fit your budget.

Does the company have a good track record?

• Ask the company for testimonials from previous clients as well as their contact details so you can call them yourself and ask your own questions. Ask the company to take you to some of their completed developments as well as some under construction so you can see the quality of work and different types of projects they’ve managed

Smart property developers utilise advisors who can help to maximise their returns. There’s no need to go it alone and with a good development manager, just about anyone can build a highly profitable development.

Have you always wanted to complete your own development? Contact us today for a no-obligation consultation.

Strictly business: managing your investments

Are you considering befriending your tenants? It might be a decision you come to regret if you decide to mix business with pleasure.

It may seem like a great idea to introduce yourself to your tenants because you’d presume they’d have a greater respect for your belongings than a complete stranger.

However, forming relationships with tenants can backfire, in some instances, as the lines become blurred between friend and landlord.

For example, a tenant you’ve become good friends with may start stretching the terms of the rental agreement by:

• Failing to pay rent on time
• Not maintaining the property adequately
• Bringing pets into the house

If you’re a self-managing landlord and you’ve become good friends with the tenant, these types of scenarios can become tricky to handle, particularly if it gets to the stage where the tenant needs to be evicted.

As a landlord you may also become amenable to their requests or situation.

This is not to say that you can’t be courteous or sympathetic to your tenants, but the relationship should be maintained at arm’s length – being friendly is different from being friends.

The key to being a good property manager is that you need to treat your investment property like a business.

That’s a primary reason why you should utilise a professional property manager who will act as an intermediary and help remove the emotional decision making process when significant issues arise.

Want to learn more property management tips? Download our free eBook here.

Suburb snapshot: Lynwood

Amid ongoing gentrification, Lynwood provides investors with an affordable price point and is located next door to some more fancied postcodes.

Lynwood is located in the City of Canning just 12 kilometres south-east of the Perth CBD.

Bounded by Metcalfe Road in the north, High Road in the south west and Nicholson Road in the east, the suburb comprises about 3,100 residents with a median age of 34.

About 73% of the properties are either fully owned or being purchased with about 26% being rented.

With a median house price of $460,000, Lynwood’s main drawcard is its affordability and proximity to more fancied suburbs, such as Parkwood to the south east and Ferndale to the north.

While the suburb is experiencing gentrification, there is some state housing in the area but savvy investors can find pockets in which it’s not present.

Lynwood Village Shopping Centre is located within the suburb and Westfield Carousel Shopping Centre is located just 2.5km away.

The suburb is established residential, mostly zoned R20 in the south and R30 in the north, with approximately 90% houses and 8% duplex, villas and townhouses.

The housing stock was predominately developed throughout the 1960s and 1970s and only a small portion contains new developments.

About 18.3% of residents are employed as professionals which is around the WA average of 19.9%, while 16% are technicians and trade workers and 15.6% are clerical administrative workers.

Bannister Creek Primary School is located within the suburb and Lynwood Senior High School is directly adjacent in Parkwood. There are large areas of parks and reserves, including Bannister Creek Parks, Purley Park, Woodford Park and Edgeware Park.

Longer leases provide less stress

The commercial and residential markets can differ significantly, one main point of difference being the length of lease agreements, which for commercial property are weighed in the investor’s favour.

If you’re a residential property investor or ever rented a house or a unit, you’ll know that residential leases are relatively short, typically 12 months or as even as short as 6 months.

As an investor, this means you’ll have to go through the rigmarole of renegotiating the lease agreement quite frequently, provided you don’t utilise a professional property manager.

There’s also the prospect of more frequent vacancy periods, as residential tenants can be more nomadic.

Commercial property is typically different, though, as lease agreements are generally several years and, in some cases, can be as long as two decades or more.

It’s evident that commercial leases are generally much longer than residential.

This is highly beneficial for commercial investors as they don’t need to renegotiate the lease agreements as regularly or worry about finding new tenants as frequently.

However, there are downsides, though, as commercial properties will often experience much longer vacancy periods than residential properties.

It’s not uncommon for commercial properties to remain vacant for several months or even more than a year, while residential properties typically remain vacant for just several weeks or slightly longer.

So as a commercial investors you have to be comfortable with these long vacancy periods, however once you’ve secure a tenant, you’ll have peace of mind that you don’t need to renegotiate the lease for some years.

4 reasons why you should use a mortgage broker

When it comes to investing in property and building a large portfolio, a good mortgage broker will play a significant role in boosting your personal wealth.

The popularity of mortgage brokers has increased significantly in recent years, so why is it important to use these specialists rather than directly engaging a lender?

Here are 4 reasons.

1. A good broker can strategically arrange your finances and loans so you can access a higher volume of credit.
2. A good broker can structure your finances to suit your individual circumstances (i.e. your financial capacity, investment goals and life circumstances).
3. A good broker will have access to a wide variety of lenders. In Momentum Wealth’s case, more than 40.
4. A good broker will save you time and money as you won’t have to shop around to find the best deal.

There a number of benefits to using a mortgage broker, but it’s important to note that not all brokers provide the same level of service.

It’s critical to engage a broker that specialises in investment loans because they will have a deeper knowledge and more experience with such transactions, whether it be for the direct acquisition of a residential property, to finance a residential development, to invest via a SMSF or to purchase a commercial premise.

Overall, a good mortgage broker will provide the right advice and recommendations that will help you to build a larger property portfolio much faster.

Before you even start your search for an investment property, you should engage a broker who specialises in investor loans to gain a comprehensive understanding your financial capacity.

The importance of unbiased research

Most investors would agree that buying a high-quality investment property requires comprehensive research. So why do so many fail to achieve the returns they hoped for?

While it’s true that some investors conduct inadequate research before they buy, the real problem for investors is that most research is not designed with the investor’s goals and interests in mind. This can lead investors to make significant investment decisions based on information which is, at best, incomplete or, at worst, misleading.

During your research, it’s wise to consider who the research was originally developed for.

For example:

Property developers commission research to find sites that will be the most profitable and provide the best economies of scale, to allow them to develop and profit again and again.

• Property industry bodies collect data and report on city-wide and nation-wide statistics and trends. This information is interesting reading (hence why it’s so eagerly published by news media outlets) but it doesn’t give much insight into how local areas perform for investors – and more importantly, why they perform (or fail) the way they do.
• Property marketers conduct research on local economic and property market activity in order to find the best ‘good news stories’ to use to market and sell their client’s development project.

So how can investors be sure that their research will lead them to find and acquire a high-quality investment property? Here’s some tips from our research team on what makes property research work:

• Collect a large volume of data, from a wide variety of sources. This could include your typical real estate data, government-collected data (e.g. Census), industry reports and economic indicators.
• Consider the macro factors (i.e. city-wide factors) of economics and population trends, as well as the micro factors (i.e. street-level factors), such as local area gentrification and the emergence of new café strips. Public and private spending on infrastructure should also be analysed.
• Some of the most valuable data is not published broadly. That’s why our research team consistently record suburb-level supply statistics, track upcoming property developments and read local council minutes. These behind-the-scenes details can make or break a property’s performance.

What lies beneath – unearthing your site’s secrets

Asbestos, building rubble and even kitchen appliances – buried secrets that can be detrimental to your residential development and how to find them.

Many investors only focus on the structural aspects of a property, i.e. the house, when searching for their next development site.

However it’s always a good idea to find out what lies beneath the surface of a site, otherwise you might end up with a costly remediation bill.

Case study: Development site with (hidden) pool included

Take the below case study, for example.

A client approached Momentum Wealth to find him a development site with specific features, including:

• Located in an established area
• Close to parks and amenities
• Good capital growth drivers
• High rental demand

Our research team worked with our buyer’s agents to create a shortlist of possible sites that met the client’s criteria.

After completing some initial feasibility calculations we identified a development site and, with the client’s approval, placed an offer on the property, subject to due diligence.

As part of our due diligence we conducted satellite photo analysis which discovered a very serious issue with the property.

Below the surface of the site was an old pool that had been buried by the owners some years earlier.

Our investigations found satellite photos that showed the pool being buried and a soil test determined that the pool wasn’t filled in correctly, which could cause soil erosion and costly damage to any future development on the site.

Because we were able to identify the issue during due diligence, we were able to negotiate the remediation of the site at the seller’s expense.

This case study illustrates why it’s imperative to complete adequate due diligence, including soil tests, when buying your next development site, even if everything above ground seems fine.

If you fail to do so, you may buy a property with severe geotechnical issues that could cause significant damage to your development and could cost thousands of dollars to repair.

5 actionable tips to keep good tenants

Too many landlords take a ‘set-and-forget’ approach once they’ve leased their investment property, but being proactive can potentially save you thousands of dollars.

Once you’ve secured a tenant for your investment property, it’s easy to sit back and expect the rent to roll in.

While it can be as easy as this, it can also pay to be more active to address any issues that your tenants may have with the property to ensure they remain satisfied.

A happy tenant is likely to stay longer, which will save you a lot of money by avoiding more frequent vacancy periods and, subsequently, lost rental income.

Here are 5 actionable tips you can use to keep your good tenants from moving out.

1. Suggest including a regular gardening service as part of the rental agreement. This will give you peace of mind that the property is being maintained and the tenant will appreciate not having to complete the work themselves.
2. 3 months before the lease renewal is due, compare your property with other similar properties currently on the market. How does the rent and the quality of the properties compare? If other properties have better features (e.g. air-conditioning or a dishwasher) or the rent elsewhere is substantially cheaper, you could be vulnerable to losing your tenant. Once you have a clear idea on how your property stacks up, determine if a small rent adjustment or investment in new features or amenities is necessary.

1. Attend to repairs promptly to ease the inconvenience on the tenant. When you have a tradesperson on site, pay a little extra for them to check and test other fixtures at the property and give them permission to fix small items straight away. This will help prevent future maintenance issues, which means savings on call out fees for you and less time and frustration for the tenant.
2. Don’t leave personal belongings at the property, unless negotiated as part of the rental agreement.
3. Maintain space between you and the tenant. If you’re self-managing the property, keep the relationship professional and conduct routine inspections at agreed times. If you’re utilising a property manager, it’s best not to contact the tenant in any circumstances but communicate with them via the property manager.

Suburb boasts premium location and amenities

The suburb has the lot – quality schooling, extensive golf courses and parklands, a major regional shopping centre and is in close proximity to the beach.

Karrinyup is located in the City of Stirling and conveniently located just 12 kilometres from the Perth CBD and 2km from Trigg Beach.

There are a number of good schools in the area, including Deanmore Primary School, Newborough Primary School, Karrinyup Primary School and St Mary’s Anglican Girls School.

The suburb’s median age is 40 years and it comprises a population of about 8,500 residents.

More than 30% of the residents aged over 15 years identify as professionals, which is significantly higher than the WA average of 19.9%.

About 73% of properties are owned outright or with a mortgage, while about 23% of properties are rented – there is minimal state housing in the area.

Karrinyup Shopping Centre, which is located in the middle of the suburb, is a major drawcard for the area, as well as two golf courses and significant parklands, including Millington reserve, Karrinyup reserve and neighbouring Lake Gwelup Reserve.

The median house price sits at $820,000.

The area was largely developed in the 1950s and features a mix of residential and commercial buildings that have been built over the decades.

About 85% of dwelling in Karrinyup

are houses, 10% duplexes, townhouse or villas and 4% are flats, units or apartments.

Its neighbouring suburbs include Gwelup (east), Doubleview and Scarborough (south), Trigg and North Beach (west) and Carine (north).

Its main arterial roads include Mitchell Freeway, Karrinyup Road, Reid Highway and Marmion Avenue.

How do I invest in a syndicate?

As you might have guessed, investing in a syndicate can be somewhat of a different process to buying a property directly, so what exactly is the procedure?

While the process for investing in a residential development syndicate varies from company to company, one method is a capital first fund, where investors commit to a certain percentage or amount before the property is found.

These types of residential development syndicates typically follow the below steps.

1. Initial briefing of proposed syndicate. Potential investors are sent an Information Memorandum and invited to a syndicate briefing which outlines the goals of the syndicate, including targeted metrics, such as raising amounts, returns to investors, development size and composition etc.
2. Raising committed funds. Investors who are interested in participating in the syndicate then provide an initial deposit to the fund to secure their place. The deposit can vary but it can be around 5% of the amount they intend to invest.
3. Site search begins. With funding commitments meeting the specified raising amount, the search for a suitable development site begins. At Momentum Wealth, our in-house research team works with our syndicate team to constantly monitor the market and create weekly shortlists of potential sites. These sites are then subject to more analysis and initial feasibility studies are done to determine their profitability.
4. Offer placement. When a suitable site is found an offer is placed on the property and formal due diligence starts.
5. Information evening for investors. Provided the site meets the criteria under the due diligence process, an information evening is held for those investors who outlaid the initial deposit. Investors are provided with financial feasibilities (including forecast costs, profitability and returns), construction timelines and other key information pertaining to the site.
6. Final investment decision. Investors can elect to deposit the balance of their committed funds to proceed with the syndicate and the site is secured.

1. Once investors have made their final investment decision and the site is secured, project planning is finalised and presales and project construction begin.

Construction time will vary on the size of the development, but a boutique apartment complex (consisting of circa 30 apartments) should typically take about 18 months.

When’s the best time to diversify into commercial?

Commercial property should, at some stage, be considered as part of every investor’s asset mix, but when’s the right time to take the leap and add it to your portfolio?

Typically, commercial property plays a different role in your investment strategy compared to residential assets.

As a general rule of thumb, investing in commercial property is best done when you want higher cash flow, for example, at retirement when you need to supplement your income.

Conversely, investing in residential property is a strategy for investors starting out in property. It provides a lower rental return but generally a higher expected capital growth rate.

Why commercial property for cash flow?

Commercial property can deliver yields of between 7-9%, compared to residential yields of 3-4%, which is why commercial is best for when you need additional cash flow.

These higher yields will supplement your income at retirement and provide the cash flow you need for your everyday living expenses, as well as for travel, recreation, dining and any other costs.

Generally, investors should start considering commercial property investment when they have built a portfolio of at least 3 or 4 residential properties.

However, there are no hard-and-fast rules and adding commercial property to your asset mix will depend on your investment strategy and goals.

Hypothetical borrowers shine light on lenders’ changes

New research shows the Australian Prudential Regulation Authority’s (APRA) crackdown on investor loans is taking effect with average loan sizes recording a sharp drop.

APRA has increased scrutiny of financial lenders’ practices in recent times in a bid to bolster the nation’s banking system.

To compare how lenders evaluate their clients, APRA created four hypothetical borrowers.

Using the four borrowers, APRA surveyed 20 banks, building societies and credit unions in December 2014 to determine how they evaluate these clients.

To test how lender’s policies had changed in response to APRA’s crackdown on property loans, the watchdog ran a second survey in September 2015 using the same four hypothetical borrowers.

The results found that the maximum loan sizes to property investors dropped 12% on average. Meanwhile, the maximum loan sizes for owner-occupiers dropped 6% on average.

Lenders tighten investor-loan criteria

To determine how different lenders evaluate these four hypothetical borrowers, the survey utilised four data points. These are:

•Borrower’s income

•Living expenses

•Interest rate for the new loan

•Interest rates for their existing loan

Most lenders use these four factors to determine a borrower’s Net Income Surplus (NIS), which is used to determine the serviceability capacity of a borrower.

The research found that lenders were now applying higher interest rate stress tests to existing loans with rates of between circa 5-8% in December 2014 compared to 6-9% in September 2015 – with most typically above 7%.

Many lenders had also raised the borrower’s minimum living expense assumptions, while some lenders applied larger discounts to borrower’s incomes, particularly those on less stable sources of income, such as overtime, bonuses and commissions.

Given the changing financial lending market, investors should engage brokers who specialise in investor loans to ensure they’re optimising their borrowing capacity.

Building approvals a telling sign for investors

Despite the soft property market, building approvals for medium density houses in Perth have grown, highlighting the continued shift in buyer’s attitudes towards these dwelling types.

The number of medium density housing building approvals in Western Australia increased 0.4% to 8,001 in the year ending November 2015.

Although the growth was only minor, the number of approvals was still higher following a 35% increase in medium density approvals a year earlier and amid a slower property market in the state.

The growth in the medium density housing segment also came at a time when approvals for stand-alone dwellings dropped by 12.9%.

The new figures were released last month in Bankwest’s Housing Density Report. Bankwest said the resilience of the medium density housing space would be underpinned by Perth’s population growth over the next decade.

“Perth’s population is forecast to grow by 33% to 2.8 million in 2025, bringing an extra 700,000 people into the city,” Bankwest said.

Medium density housing has become more popular in Perth in recent years as residents increasing want to live closer to their places of work, specifically the CBD, as well as the Swan River, coastline and established amenities, such as café and retail strips and train stations.

The shift towards medium density housing highlights the importance of acquiring investment properties in Perth’s inner metropolitan ring.

As the city’s population continues to grow, so too will the demand for properties within this zone.

Properties that have large land components in suburbs with restricted supply capacity are likely to perform the best in the long term.

While the move to medium density housing has increased in Perth in recent years, the city is still lagging behind its capital-city counterparts.

Medium density building approvals comprise just 30% of total building approvals in Perth compared to 57.9% in Melbourne, 64.5% in Brisbane and 69.4% in Sydney, according to the report.

Concerted and coordinated approach maximises returns

When it comes to designing your property development, a coordinated effort between builders, architects and town planners is needed to optimise your site.

During the design process of a property development, many investors will either engage a builder or architect to help determine the size and number of dwellings to build.

This stage of a development is highly important because the decisions made now will have a big influence on the final yield of the project.

As such, a better approach is to incorporate both building specialists and architects into the design process, as well as town planners, who have a firm understanding of the residential design codes that govern what can and cannot be built.

For example, a client recently engaged Momentum Wealth’s developments team with a 1,000 square metre development site located in a north-east suburb in Perth.

With a zoning code of R40, the site was, on face value, suitable for the development of 8 multi-dwellings.

However, particular to this site was a 5.5 metre slope to the rear.

Typically, sloping blocks can be more costly to develop because they present unique challenges in terms of drainage, excavation and building height.

Subsequently, more site and earthworks typically need to be completed.

In this case though, our in-house town planners and development specialists worked with designers to utilise the natural contours of the site to the client’s advantage.

The final design, which recently received building approval, comprised a 2-storey building on the street front and a 3-storey building at the rear with car parking in between.

The sloping block meant the height variation between the front and back building was negligible, despite the extra storey at the rear.

Adding the extra storey also allowed us to include 10 dwellings, compared to the original design of 8, and an additional 150sqm of floor space.

Using the innovative design, the projected yield for the client has increased by more than 30%.

This project is an excellent example of why it’s important to incorporate building specialists and architects as well as town planners into the design process.

This approach will help to ensure you utilise your development site to its fullest potential and, in turn, optimise your returns.

Legal risks and liabilities: the real cost of self-managing

Are you considering self-managing your property portfolio? The decision to do so may prove significantly more costly than you think.

It’s not uncommon for novice investors to consider managing their own portfolios, particularly if they only own 1 or 2 properties.

However, by taking on the responsibility to self-manage, you’re also likely to be taking on more risk, not only financially, but legally as well.

So what are the risks if you decide to forego professional property management?

Firstly, and perhaps most importantly, self-managing landlords are susceptible to legal action if they don’t fully understand the legal requirements for leasing a property.

This can include the requirements for installing smoke alarms or ensuring minimum security obligations, among many other issues.

Furthermore, self-managing landlords may also be vulnerable if they don’t understand their own rights and the rights of the tenant.

It’s not uncommon to hear stories of tenants who stop paying their rent or who’ve trashed their rental property.

In such circumstances a professional property manager will mitigate the risk of this occurring by compressively screening applicants and understanding the legal recourses should such incidents occur.

Self-managing landlords who haven’t followed proper procedures may find that their landlord insurance company either discounts or refuses to pay a claim.

Should the need arise to go to court, a good property manager is able to act on the owners behalf, will know how to adequately prepare for a hearing and have supporting evidence and information to back up their case.

It’s important to remember, also, that the cost of hiring a property manager is tax deductable, so any perceived savings from self-managing are likely to be negligible.

Subsequently, the real savings made from self-managing don’t outweigh the benefits of engaging a professional property manager.

Eden Hill: Old suburb provides affordability

Eden Hill: This suburb was first developed nearly a century ago and provides an affordable option for property buyers.

Eden Hill is located 11 kilometres north-east of the Perth CBD and comprises about 3,500 residents.

It’s bounded by Morley Drive East to the north, Walter Road East to the south, Wick Street to the west and Lord Street to the east.

The housing stock in the area dates back to the 1920s when the first significant residential development occurred.

However, with the suburb being rezoned in recent years, more infill development has since occurred.

The stock comprises approximately 88% stand-alone houses, 7% duplexes, villas and townhouses and 5% flats, units and apartments.

As well as its proximity to the CBD, the suburb’s main drawcard is its relative affordability.

With a median house price of $477,500, according to REIWA, the suburb sits below Perth’s median price.

This is reflected in the suburb’s demographics with about 14% of resident identifying as professionals, compared to the state average of about 20%.

About 18.5% of residents also identify as technicians and trades workers (WA 16.7%) and 17.9% as clerical and administrative (WA 14.7%).

The Eden Hill Primary School is located within the suburb and Hampton Senior High School is directly to the west.

Morley Galleria Shopping Centre is also 4km to the west and the Bassendean Shopping Centre is 2km to the south.

Its closest train stations are Bassendean and Success Hill, also located about 2km to the south.

Property syndicates’ popularity grows amid planning changes

Property syndicates have increased in popularity in recent years, but why have they suddenly become a more prominent investment strategy?

It’s not uncommon to see media reports touting the success stories of “average investors” who’ve joined a property development syndicate.

Less than a decade ago, though, property syndicates in Perth were all but unheard of and usually the domain of sophisticated investors with the right connections.

So what’s changed in that time for syndicates to be more commonplace?

Perhaps the biggest catalyst has been the Western Australian government’s planning blueprint, Directions 2031, which was released in 2011.

The report outlines the government’s planning strategy for metropolitan Perth including the identification of key activity centres and transport links.

One of the document’s key goals is to achieve a 47% infill target – that is 47% of new dwellings need to be built in established suburbs, rather than developing new land estates on the urban fringe.

As such, many local councils are updating their town planning schemes to comply with the state government’s objectives and meet set population targets.

This includes increasing housing density, for example from R20 to R40, particularly around key activity centres and public transport nodes.

These zoning increases have led to a more conducive environment for the construction of medium density residential developments, such as boutique apartment complexes between $3 million and $20 million.

These types of developments are generally too large for single investors to bankroll and too small for the consideration of big state and national developers.

Therefore, property syndicates, whereby a number of investors pool their money, are a great avenue to fill this gap in the market and have proven to be highly lucrative for investors.

This development activity is also supported by rising demand for medium density housing, which is increasingly attractive to buyers for its affordability advantages, lower required maintenance and proximity to key amenities, such as transport links, employment hubs and retail and café strips.

Bigger isn’t necessarily better in commercial property

Many investors envisage city skyscrapers and large shopping complexes when commercial property comes to mind, particularly those unfamiliar with the market. However, bigger isn’t necessarily better in commercial.

Given that much of the mainstream media focuses on these segments of the market, it’s understandable that many investors only think of the big end of town.

Of course, individual investors wouldn’t be able to afford an office tower, for example, as these large assets typically cost a minimum of $20 million and are owned by big institutional and superannuation funds.

But that doesn’t mean individual investors can’t afford a high-quality commercial property.

Indeed, investors should think small when it comes to commercial property, and look to the suburbs.

Commercial space within smaller suburban shopping centres can make a good starting point.

Although retail has suffered with the rise of online shopping in recent years, service providers, such as hairdressers, will continue to need bricks and mortar stores to operate.

Investors should consider suburban shopping centres that are anchored by a large supermarket and also comprise other specialty stores, such as a baker, butcher and chemist, for example.

Similarly, specialty medical spaces, for chiropractors, physiotherapists and general practitioners, will continue to see demand over the long-term and can make great investments.

Investors must be aware of vacancy rates and market rents, though, as these can vary widely between suburbs and property types.

Unfortunately, most of the published statistics on the commercial property market relate to the CBD statistics, so it can pay to engage a buyer’s agent who will hold a firm understanding of the local suburban markets.